Professional Gold Trading: The ultimate guide to learning to trade precious metals | 2020
Gold trading is assumed to be a normal part of Forex trading. Where gold tends to give greater opportunities for trading profits more than trading traditional Forex currency pairs. Traders who have a few hundred or a few thousand dollars can trade gold online in an efficient and meaningful way by using Forex / CFD brokers who provide trading services. It is worth noting that trading gold through the application of technical analysis methods, profits are better achieved than those that can be filtered by the basic analysis, and whose details will be explained below with historical price data, but first let's get acquainted with the most important reasons and factors that make gold one of the most important commodities Trading globally.
Read more about gold prospects for 2020 here
Protection from inflation: wherein the circulation of gold, the value of gold tends to rise with the rising costs of living, which means that it is a tool to protect from inflation. If you take a quick look at the history of the US stock market, you will see that in times of high inflation, the Dow Jones industrial index declined, while the cost of gold remained constant, if not higher than usual. Consequently, anyone with a concern about the impact of inflation on their investment returns should consider investing in gold.
Gold helps diversify the investment portfolio: Any professional financial advisor will tell you that it is very important to have a diversified list of assets in the investment portfolio. Although some people think that diversity is only calculated when it is in the form of a mixture of stocks, bonds, or CFDs or currencies, gold trading is an excellent way to add a new dimension to the investment portfolio and to add a little stability even to the high-risk province.
Gold is immune to geopolitical crises: Although currency values and stock prices tend to fluctuate based on the political climate in a particular country at a given time, gold trading tends to resist such dramatic price changes that make it a strong choice for anyone with a concern that The currency of his country could be in danger, as well as for those who are concerned that their currency may lose its value for any reason at the time they desperately need it.
Limited production increases value: Unlike currencies, where government leaders intervene by pumping more money almost instantly, gold production is a laborious process and may take years. For this reason, we see every several year's global demands exceed supply, which leads to a rise in the value of gold.
Gold Preserved Value: Even a quick look at market patterns will show that all currencies are falling significantly at some point and that global stock markets have fallen as well. However, gold is a metal that has maintained its value for thousands of years. Where gold is valuable since the biblical time and remained on that until our time. Although the price does not always rise, gold has never experienced a long-term decline in value as is the case with all major currencies throughout history, including the US dollar. For these and other reasons as well, gold trading becomes more and more popular every day.
Trading gold or investing in gold?
Investing in gold: which means buying it and keeping it for a long time, meaning months or years. As for speculation on gold, it means buying and selling it several times in a shorter period, such as days, or even hours or minutes. Precious metals are popular markets, and it is quite common to hear people suggesting that 5 to 10% of your portfolio should work in gold or silver. The reason is simply to compensate for the slow movements in currency trading, as investors tend to buy gold when it falls and hold it for a long time. Conversely, if you are a gold dealer by CFD, this mindset will not apply to you, and if you are a trader, you must realize that the precious metal markets have exceptional technology. For example, gold markets tend to focus on increases of $ 10, while silver market participants tend to focus on the increase of $ 0.50 on the chart. The advantage of investing in gold is also the possibility of using a few hundred US dollars by buying physical gold in the form of coins or by buying a few shares in gold bars that are kept in safe safes. However, these methods are not practical for trading, as they do not give the ability to sell short. Also, gold coins do not directly reflect the value or price of gold, as the price contains the margin of sale. Also, it should not be forgotten that keeping gold as an investment can include problems related to proof and storage. Unlike trading gold, through the global market, which enables you to achieve greater and more profits, by exploiting the fluctuations of gold prices up and down.
Where can you trade gold?
You will need to trade something closely related to the value of gold, or the price of gold itself.
Trading options or gold futures contracts
The ideal option for those who trade gold is trading with gold options, or gold futures contracts, which represent real gold through a major organized exchange. However, this requires a deposit of not less than $ 5,000 with a futures broker, because the lowest gold futures contract represents just over 33 ounces of gold and the purchase or sale of one contract will require this amount of margin to support trading.
Trading in gold ETF funds
The alternative solution is trading in shares in ETF (Stock Exchange Fund) that owns gold and whose price fluctuations closely reflect the price of gold itself. The best example of an ETF is the SPDR Gold Box. However, this requires opening an account with a broker that directly trades gold in stocks and bonds.
Such stock brokers usually require a minimum deposit of several thousand dollars and impose a high minimum commission or difference on each trade. This will cost you per share in the SPDR box of gold about 10 value of the ounce of gold priced in US dollars, and therefore this will be very expensive as well for most people who want to earn money from trading gold prices for less than 5000 dollars, because it is difficult to get the maximum Leverage is higher than 2 to 1.
Trading in shares of gold mining companies
The other option for gold price traders is to buy and sell shares of gold mining companies, as the value of these shares is affected by the value or price of gold. However, this option includes the same difficulties of speed, cost, and minimum deposit, in addition to that, the value of gold is one of several factors that drive the price of these shares.
Trading gold through a Forex broker
This method is quick, easy, practical, and inexpensive for anyone who wants to spend a few hundred dollars or thousands on gold trading: by opening an account with a Forex / CFD broker that provides spot gold trading services (the actual price of an ounce of gold). The majority of Forex brokers provide spot gold trading services in US dollars, and there is quite a number that offer gold price trading in other major currencies such as the euro or Australian dollar. Almost all Forex / CFD brokers who offer gold trading services enable traders to trade only 10 ounces of gold, and some of them reach only one ounce. With the leverage of gold at 20 to 1 in the European Union, and much higher by brokers operating outside the European Union, it becomes possible to trade gold in buy and sell positions with only $ 100 deposited at any Forex broker / CFDs.
The disadvantage of trading on gold through the Forex broker/contracts for the difference of two negative points, which must be paid attention to.
Commissions charged may be quite high, but there are plenty of brokers who offer very suitable offers, so you can avoid this problem.
Brokers usually charge fees for each day that you leave trading open after 17:00 New York time unless you open an Islamic trading account. This means that if you keep an open trade for several days, or even weeks or months, you have to make sure that the gold trade is going well enough to justify these costs. Some brokers post these fees, which can be imposed daily, on their website. These fees are usually described as "swap fees", "tomorrow / next" fees, or "financing fees until the next morning." If your broker does not publish these fees on the website, you should be able to find them on their trading platform. Where on the MetaTrader4 platform, you can find out gold prices by right-clicking in the "Market Watch" section of the trading symbol you want to check (for example, the gold / US dollar pair), and choosing "Properties". Usually, a different price will be applied to the buy or sell positions. Rarely, the rate may be negative, which means that you will get money for keeping trading open until the next day, but this is not possible in the gold market, and Forex brokers usually provide gold trading services in the list of assets under the name "gold" or "gold" /U.S. dollar".
What currency should you trade in precious metals?
Most analysts talk about trading precious metals in US dollars, but depending on your broker, you may have the ability to trade precious metals in euros, pounds, Australian dollars, Canadian dollars, or even the Japanese yen. The question then is what currency do you trade in the markets? In fact, it is simple at this stage. For example, if the price of the Japanese yen has risen dramatically, you know that you do not want to buy precious metals and trade gold in that currency. And if the US dollar falls, then it is logical that there will be more gains in the gold market against the dollar than the yen. So, as a function of money flow, it makes sense to buy gold in weak currencies, mainly to avoid inflationary problems, while selling it in stronger currencies. As a rule of thumb, the gold markets will move in the same direction, but if you can get a better returns by converting the quote currency, you can make stronger gains. At the end of the day, since you're not taking the actual delivery, so what really matters is the amount of return you get.