How To Trade Gold Safely? Tips and Tricks.


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Savers and investors like gold for many reasons, and it has attributes that make the commodity a good counterpoint to traditional securities such as stocks and bonds. They perceive gold as a store of value, even though it’s an asset that doesn’t produce cash flow. Some see gold as a hedge against inflation, as they worry that the Fed’s actions to stimulate the economy – such as near-zero interest rates – and government spending may send inflation racing higher.

What is Gold Trading
Since gold is a highly valuable asset, many traders profit on its price via options, futures, ETFs, CFDs, or shares. When trading gold, you can easily benefit from the market's ups and downs. While choosing a position, a trader aims to predict the market movement – the further the market moves in their predicted direction, the higher profit an investor will get, and vice versa, the market took the wrong turn – an investor is losing.

Compared to the forex market, the daily trading volume of this asset is higher than most currency pairs (except majors). For investors, it means two things – high liquidity and tight spread.

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The value of gold

The price of gold can fluctuate depending on political, social and economic instability. Trading gold is sometimes referred to as a ‘safe haven’ by traders because, unlike some shares in the stock market, its price is not always affected by governmental decisions or inflated by interest rates. On the contrary, gold can act as a form of insurance, as investors might reallocate assets into the gold market at unstable times. This could increase the value of gold, since its demand might rise as traders attempt to use it as a stock hedge.

9 Top Gold Trading Tips:

1. Keep the sizes of your gold, silver and mining stock trading positions small. The higher the chance of being correct, the bigger the position can be (that’s why sizes of long-term investments are bigger than sizes of short-term trades).

2. Pay attention to cycles and turning points – many markets have cyclical nature (for instance the USD Index and silver) and cycles can be a great help in the case of short- and long-term trades.

3. Check the efficiency of each indicator that you want to use on the gold market (or other markets) before applying it and trading real capital based on it.

4. Consider using RSI and Stochastic indicators for gold, silver and mining stocks as they have proven to be useful over many years. Other indicators can be useful as well, but be sure that you examine them before you decide to make trading decisions based on them.

5. After learning and understanding how gold trading works, you should now take time to develop a strategy. This should guide you on when to buy, hold, or short gold. Also, the strategy can either be technical or fundamental. You can also combine the two analysis methods to create a trading strategy.

6. A risk management strategy is a must. This is just how you’ll manage to control and minimize your potential losses.

7. Technical and fundamental analysis should become an integral part of your trading activities.

8. Trade with a strategy. It’s your lighthouse.

9. Trend is your friend. Monitor price fluctuations closely to be on top of things and make rational decisions.

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Trading the commodity indices market can be a good way for traders to explore gold trading without placing all hopes and efforts in one single commodity. A disadvantage of trading gold is that the asset can be volatile in the short-term. By trading our Precious Metal Index, a trader does not place all of his hopes in the value of gold and instead may hope that the other commodities will bring up the overall value and price of the index.

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