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How to Trade Gold - in Just 4 Steps | Arabic NSFX

Author: Beshoy Adel
by Beshoy Adel
Posted: Apr 30, 2020

Whether it's behaving like a bull or a bear, the gold market offers high liquidity and excellent opportunities to profit in nearly all environments due to its unique position within the world’s economic and political systems. While many folks choose to own the metal outright, speculating through the futures, equity and options markets offer incredible leverage with measured risk.

Market participants often fail to take full advantage of gold price fluctuations because they haven’t learned the unique characteristics of world gold markets or the hidden pitfalls that can rob profits. In addition, not all investment vehicles are created equally: Some gold instruments are more likely to produce consistent bottom-line results than others.

Trading the yellow metal isn’t hard to learn, but the activity requires skill sets unique to this commodity. Novices should tread lightly, but seasoned investors will benefit by incorporating these four strategic steps into their daily trading routines. Meanwhile, experimenting until the intricacies of these complex markets become second-hand.

  1. What Moves GoldAs one of the oldest currencies on the planet, gold has embedded itself deeply into the psyche of the financial world.1? Nearly everyone has an opinion about the yellow metal, but gold itself reacts only to a limited number of price catalysts. Each of these forces splits down the middle in a polarity that impacts sentiment, volume and trend intensity
  2. Understand the CrowdGold attracts numerous crowds with diverse and often opposing interests. Gold bugs stand at the top of the heap, collecting physical bullion and allocating an outsized portion of family assets to gold equities, options, and futures. These are long-term players, rarely dissuaded by downtrends, who eventually shake out less ideological players. In addition, retail participants comprise nearly the entire population of gold bugs, with few funds devoted entirely to the long side of the precious metal.
  3. Read the Long-Term ChartTake time to learn the gold chart inside and out, starting with a long-term history that goes back at least 100 years. In addition to carving out trends that persisted for decades, the metal has also trickled lower for incredibly long periods, denying profits to gold bugs. From a strategic standpoint, this analysis identifies price levels that need to be watched if and when the yellow metal returns to test them.
  4. Choose Your VenueLiquidity follows gold trends, increasing when it’s moving sharply higher or lower and decreasing during relatively quiet periods. This oscillation impacts the futures markets to a greater degree than it does equity markets, due to much lower average participation rates.9? 10? New products offered by Chicago’s CME Group in recent years haven’t improved this equation substantially.

CME offers three primary gold futures, the 100-oz. a contract, a 50-oz. mini contract and a 10-oz. a micro contract, added in October 2010.11? 12? 13? While the largest contract's volume was over 67.6 million in 2017, the smaller contracts were not as widely traded; 87,450 for the mini and.05 million for the micro.14? 15? 16? This thin participation doesn’t impact long-dated futures held for months, but strongly impacts trade execution in short-term positions, forcing higher costs through slippage.

The SPDR Gold Trust Shares (GLD) shows the greatest participation in all types of market environments, with exceptionally tight spreads that can drop to one penny. Average daily volume stood at 14.54 million shares per day in March 2020 2020, offering easy access at any time of day.17? CBOE options on GLD offer another liquid alternative, with active participation keeping spreads at low levels.Learn more about trade gold from NSFX

About the Author

I love forex trading, Learning to trade successfully while managing your risk is a continual process.

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Author: Beshoy Adel

Beshoy Adel

Member since: Apr 06, 2020
Published articles: 9

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