Trading Forex should include trading gold without much thought. Gold offers better profit potential than most major currency pairs on the Forex market. Forex and Contracts for Difference (CFD) brokers that provide trading in gold are the most cost-effective options for small-cap investors trading gold online with a few hundred or a few thousand dollars. The next sections, backed up by relevant price history data, explain how to use technical analysis to make money trading gold, with the option of incorporating fundamental analysis as a filter.
Gold Trading vs. Gold Investing
Gold can be purchased and sold in several different markets. Gold trading as an investment requires a commitment of a few months to a few years’ time. Gold is traded by repeatedly purchasing and selling it over a short time frame (a few days, hours, or even minutes).
The purchase of actual gold in the shape of coins or nuggets, or the purchase of modest quantities of shares in gold bullion stored in secure vaults, can be done with as little as a few hundred U.S. Dollars. Due to their sluggishness and inability to facilitate short sales, however, these approaches are impractical for use in actual trading.
Gold coins are marked up at retail, so their price does not reflect the true cost of the precious metal. Issues with evidence and storage can arise when holding actual gold as an investment. Profiting from gold’s up-and-down price changes through trading can be more frequent and substantial than through “buy and hold” investing.
Gold Futures and Option Trading
Gold Trading options or futures that are backed by physical gold on a major, regulated exchange is the best alternative for gold traders. Buying or selling a single gold futures contract requires a margin of at least $5,000 to be deposited with a futures brokerage. One gold futures contract is equivalent to a little more than 33 ounces.
Buying and Selling Gold ETFs
Trading shares of an exchange-traded fund (ETF) that owns gold and whose price swings will closely mimic fluctuations in the price of gold itself is an alternative method. The SPDR Gold Trust is a highly successful exchange-traded fund. However, you’ll need to register a brokerage account with a company that facilitates stock and share trading directly. The minimum deposits with these stockbrokers are often several thousand US dollars, and they charge hefty spreads or charges on every trade.
For most people looking to make money while gold trading with less than $5,000, purchasing shares of the SPDR Gold Trust will be an impractically expensive gold trading technique since maximum leverage is typically no more than 2 to 1.
Swapping Shares in Gold Mines
Those looking to trade gold can also do so by purchasing and selling shares in gold mining businesses, whose value moves up and down in tandem with gold’s. The same issues of speed, cost, and minimum deposit apply, plus there’s also the reality that gold’s value is only one of several factors influencing mining share values.
Spot Gold Trading with a Forex Broker
If you only have a few hundred or a few thousand dollars to trade, your best bet is to create an account with a Forex / CFD brokerage that provides trading in spot gold (the actual price of gold per ounce). Trading in spot gold priced in U.S. dollars is offered by most Forex brokers, and gold priced in other major currencies like the Euro or Australian Dollar is offered by a sizable minority of Forex firms.
Trades in gold can be as modest as 10 ounces with most Forex/CFD brokers, and as low as 1 ounce with a select few. Gold may now be traded short and long with a minimum deposit of just $100 at various Forex / CFD brokers, thanks to the huge leverage available on the asset (up to 20:1 in the European Union and even higher levels applying to brokers outside the European Union).
There are two potential drawbacks to using a forex brokerage to trade gold that you should be aware of. It’s possible that the spreads and charges being charged are excessive, but there are many other brokers who provide a more affordable alternative. Another issue (unless you’re solely day trading) is that brokers typically charge a fee for each day that you have an open trade after 5pm New York time, unless you open an Islamic fx trading account.
As a result, you should be certain that a trade is profitable enough to warrant leaving it open for a long period of time, whether that’s a few days, a few weeks, or a few months. These costs, which might vary from day to day, are sometimes made public by brokers and can be found on their respective websites. Swap, Tom/Next, or Overnight Financing Fee are all common synonyms for this charge. Current rates should be readily available within your broker’s trading platform even if they are not publicly displayed on the broker’s website.
Right clicking the trading symbol you’re interested in (XAU/USD, for example) in the Market Watch area of MetaTrader 4 and selecting “properties” will bring up the current market price. In most cases, the rate used to value long, and short positions will be different. It’s quite unlikely that gold’s rate will be negative, in which case you’d be paid to retain it overnight.
The Bottom Line
The easiest way to trade gold is to buy price breaks that take it to new 6-month highs and then use a volatility-based trailing stop loss to pull out of the trade. This is the simplest way to trade gold. Trading opportunities exist for gold and gold-backed assets such as exchange-traded funds (ETFs) and mining shares with most Forex/CFD brokers as well as conventional stockbrokers. Know more mex.ae
Gold day trading is possible with virtually any forex broker out there. However, you should be aware that the spread on gold is always larger than on main forex currency pairings. As a result, when selecting profitable trading chances, you may need to be more discriminating.
