Trade gold or forex
One of the reasons why investing in gold is so popular is because there are many ways you can invest in this commodity.
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You can buy physical gold in one of its most popular forms — gold bullion, gold biscuits or gold bullion coins. In case you just want to speculate about its price, you can consider trading shares of gold mining companies or exchange traded funds ETFs etc. But arguably the easiest and most convenient way of trading gold is to participate on the spot gold market, using the services of a Forex broker.
This post was provided by Peter Traychev, of LiteForex. Many investors choose gold in order to protect their portfolios against high inflation rates and market volatility. In addition, Forex traders who have become familiar with the financial markets and how to trade currency pairs can consider trading gold as well. In addition, by opening a live account, you are able to trade a wide range of instruments currency pairs, precious metals, oil, CFDs on shares, etc. One of the top reasons for the increased interest in gold as an investment is rooted in its limited supply. Gold is used in many ways in our daily lives so there will always be demand for the precious metal.
You may be surprised that over two thirds of this demand covers the needs of the jewellery industry and that the greatest consumer in the world is India. This indicates that demand for gold may become even higher in future years due to a steady increase in purchasing power in emerging markets. And since the production of gold is a complex and slow process, many believe that this precious metal will be used and traded over many years.
Unlike investing in physical gold, trading gold with a Forex broker allows you to buy and sell it without owning a single ounce. Thus you can catch every small fluctuation in its price movement and make money by both going long or short on gold. Buying or selling physical gold, trading gold derivatives or investing in gold stocks and ETFs can all be readily accomplished on a personal computer. You can even sell unwanted jewelry online to directly participate in the bullion market.
How to Trade Gold in Just 4 Steps
Of course, the question of how to trade gold successfully is more nuanced. There are literally thousands of ways to accomplish this task and choosing the correct one can be daunting. Nonetheless, successful gold trading becomes much more probable through education, game planning and selecting the correct product.
The global bullion markets are constantly evolving with varying degrees of complexity. For anyone interested in entering these venues, it's essential to have a basic education in the underpinnings of gold value. The following are a few fundamentals that are best considered before jumping into the gold markets:. Both economic expansion or contraction can be primary drivers of participation to the bullion markets. In times of expansion, investment levels typically decrease as investors adopt a risk-on attitude, preferring securities with greater returns, such as equities.
During periods of contraction, gold becomes a sought-after commodity.
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When examining gold securities, it is important to remember whom the other participants in the market are. Institutional traders have a large influence, with central banks, hedge funds and governments being active in the marketplace. In the event institutional capital publicly takes a position, swift moves in pricing are possible. The primary reason why gold is valuable is its inherent scarcity. It exists in the Earth's crust at a density of 5 parts per billion, Retrieved 10 July - Link ensuring that large concentrated quantities are rarely found. In turn, supplies grow at a relatively constant annual pace, making value largely a product of prevailing demand.
Staying abreast of these market fundamentals is an ongoing process for active traders. Changes in any of these items can greatly influence the global gold dynamic, in either a bullish or bearish fashion. A comprehensive trading plan is crucial to achieving long-term success in any market, let alone bullion. From traditional "buy-and-hold" investment strategies to high-frequency approaches aimed at CFD products, the trading plan is a vital part of any venture into the gold markets.
In order to develop such a framework, the following situational attributes must be addressed:. Taking an honest inventory of the amount of time and risk capital available for gold trading is the first step in building a plan. Access to adequate resources ensures that a plan is given a legitimate chance at success. Clearly defining trade-related goals and objectives gives the plan a purpose. Without a purpose, it becomes difficult to measure progress and troubleshoot any issues that may undermine performance.
Once your available resources and objectives have been quantified, a suitable trading strategy may be adopted or created. A viable trading strategy must be tailored to inputs and goals; if not, its integrity is compromised and performance will very likely suffer. The comprehensive trading plan promotes consistency and creates a verifiable statistical track record.
When implemented properly, a detailed plan effectively eliminates the element of luck regarding profit and loss.
Secrets of Successful Forex Gold Trading
The beauty of gold as a mode of trade is its flexibility and diversity of offerings. No matter the resources, goals and methodology, a suitable product is available. For instance, if you are interested in holding gold as a long-term hedge against inflation, purchasing physical bullion is one way to go. Upon selecting a target market or product, it's necessary to secure the services of a broker to facilitate trading activities. This requires due diligence. A broker must be reputable, competent and in good legal standing; if not, you need to find a suitable alternative.
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The global gold trading price is sensitive to a variety of factors. Issues such as geopolitical tensions, fluctuations in currency values or macroeconomic uncertainty are all capable of enhancing the pricing volatility of bullion. Due to the high degree of public interest, any fundamentals that skew perception toward economic or political stability are very likely to influence pricing.
By far, panic and euphoria are the premier catalysts behind moves in gold pricing. In the event uncertainty is interjected into the marketplace, prices typically rise due to bullion's standing as a safe-haven asset. Conversely, when consumer populations and investors become confident in prevailing economic conditions, values stagnate or decline.
For either scenario, perception is very much reality and prices frequently follow suit.
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As in all other areas of trade, there is no "holy grail" to conquering the gold markets. True arbitrage opportunities are rare and fleeting, leaving performance in the hands of the individual. Successful gold trading is typically rooted in discipline, consistency and stick-to-itiveness. Without these, a foray into the bullion markets is very likely short-lived.
There are certain practices that reduce pitfalls and promote competent trade. Here are a few tips for gold trading that can enhance long-run performance:. Apply Leverage Thoughtfully: The number one enemy of inexperienced or aggressive traders is becoming financially overextended. Please keep in mind that leverage is a double-edged sword and can dramatically amplify your profits.
It can also just as dramatically amplify your losses. Stay Current: The bullion market is a dynamic atmosphere. It is always a good idea to stay abreast of the day's geopolitical, monetary policy, economic and industry-specific issues. Avoid Panic Trading: Led by gold, commodities markets show a consistent sensitivity to panic trading.
While the volatility of panic trading is attractive to those seeking large profits, the chance of buying tops and selling bottoms increases significantly. Adhere To A Plan: The number-one tip anyone can give on gold trading is to build a plan and stick to it.