Now, let’s get to the point. Like most financial instruments, trading gold requires a combination of technical and fundamental analysis.
As a novice, you must be eager to focus on gold trading. However, there are other aspects to consider if you want to make a decent profit.
Understand the factors that affect the price of gold
The price of gold is usually affected by four factors- Supply and demand, geopolitical events, natural disasters and central bank monetary policy.
On the other hand, the market outlook has an inverse effect on the price of gold. If the market outlook is positive, the price of gold may fall; when the market outlook is bleak, it may rise.
If you take these into consideration, you can grasp the timing of opening and closing positions.
Identify the trading strategies available to you
Gold trading can be done using short-term or long-term strategies. The former is suitable for scalping or day trading, while the latter is for holding the underlying gold asset for a longer period of time.
In either case, the knowledge you acquire is bound to come in handy, especially when it comes to understanding how the economy is shaky and how the price of gold is soaring.
- There is an inverse correlation between the dollar and gold prices. This means that when the dollar underperforms, gold rises, or vice versa. Keeping an eye on US news can help you spot gold trading opportunities. The diagram below shows its reverse linkage. The U.S. dollar is represented by the blue line, while gold is represented by the orange line.
- Gold and the Japanese Yen, however, are linked and both are considered safe-haven assets as they have shown a strong correlation over the past century. You can use its correlation to predict gold price movements.
- Metal currency pair XAUUSD usually moves with trends. When trading, you will find that trend trading strategies can help you get the best results and produce huge results with the trend in trading XAUUSD.
- Certain technical analysis indicators are very useful for gold trading, such as Fibonacci retracements (golden ratio lines), moving averages, support and resistance levels, and price action. You’ll learn more about it as you go along.
As a novice, when trading gold, you can choose manual operation or automatic operation, and you can benefit from it. You can copy trades from a Strategy/Signal Provider (SP) that trades XAU/USD. Choosing the best SP can help you increase your chances of making a profit.
Create A Trading Plan
From now on, you must make a trading plan and follow it. This can help you develop good trading habits, be strict with yourself, do your homework before trading, and think twice before acting.
In order for you to continue to make profits, your plan needs to cover various aspects, including risk management, trading goals, psychological and psychological preparation, entry and exit rules, performance analysis and following the rules of foreign exchange trading.
Choose the right gold broker
The broker you choose depends on the type of gold you want to trade or invest in. Online brokers allow you to trade gold stocks, futures, ETFs and more via forex.
Regardless of the financial instrument used, the broker you choose must provide efficient execution speed and prioritize the safety of funds, because these are very important. To help you make a better decision, test the broker’s platform and services with a demo account.
Open a demo account
Once you choose a broker, start trading. You can start with a demo account to test the strategies that suit you and learn how gold trading works. Generally, it helps to understand the process better if you gain hands-on experience. Once you have enough confidence in trading and have learned the basic skills, you can open a real account for trading.
The opportunities for profit in gold trading are varied and varied, and can appear at different points in time. Fundamentals alone cannot go far, so you need to constantly improve yourself, understand the trading process, master strategies, accumulate experience and knowledge, and let you change from a novice to an expert trader.