What is gold trading? It's the process of buying and selling the precious metal gold. Usually, traders speculate on price using strategies like fundamental or technical analysis to make a profit by correctly predicting the market's direction.
Gold trading can involve purchasing physical gold, but it usually refers to taking buy/sell positions via financial products like Contracts of Difference (CFDs) or Exchange Traded Funds (ETFs). New traders can get started quickly by creating a gold trading account, depositing funds, and opening a position.
Gold trading beginners can struggle to succeed in the space due to its complexity and variety of factors contributing to price. However, we discuss the basics of buying/selling precious metals, selecting the right platform, how to open a position, and several gold trading tips. Let's get started.
Gold Trading Basics
In its most basic elements, gold trading involves buying and selling a single commodity. However, it's far more complex than it initially appears. Traders must take time to learn the finer points of the gold market to ensure they're not caught out unexpectedly. Some key points include:
Understanding Gold Trading Contracts
Understanding how contracts work is one of the most important yet overlooked aspects of gold trading for beginners. Gold is usually sold in units of one troy ounce (31.1 grams), which is worth around $2755. On ActivTrades, one point equals $100, so a spread of 0.25 points equals $25.
Some platforms will have larger lot sizes, particularly for futures contracts. It's common to see lot sizes of 100 troy ounces, which would incur substantial profits/losses compared to a lot of a single troy ounce. Check lot sizes before placing a trade to ensure you don't create a larger-than-expected position.
Gold Trading Times
Despite what some may think, the gold trading market is not active 24 hours, seven days a week. Like most financial markets, trade is suspended over the weekend, usually from 10 PM Friday to 11 PM Sunday.
Certain products, like futures contracts, may close early. However, gold is traded globally across various time zones, so it tends to be accessible at any time during weekdays.
The best gold trading times are when multiple markets overlap. For example, the London-New York overlap, which runs from 1:30 PM to 4:00 PM GMT, experiences the most activity and liquidity, making it a preferred choice for seasoned traders.
Gold Trading Signals
People who engage in gold commodity trading often use signals to improve their win rate. They hint at the market's direction and signal when events like reversals are likely to occur. Generally, signals are derived from technical indicators, chart patterns, or a mixture of both.
Some technical analysis techniques for gold trading include looking for patterns like head-and-shoulders or a double-top, which can signal a reversal. Technical indicators like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD) signal reversals or trends.
Fees for Trading Gold
There are several fees to be aware of when trading gold. Most platforms levy charges for opening a position or using leverage. Fees for account inactivity, deposits, and withdrawals are also standard. Additionally, traders using margin may accrue fees for holding a position overnight.
Ways to Trade Gold
People can trade gold using several methods. Some of the most popular include:
- Physical Gold: People can buy and sell physical gold ingots or coins.
- CFD Gold Trading: Contracts for Difference (CFDs) enable people to profit without owning gold by speculating on whether its value will rise or fall. Learn more in our CFD trading guide.
- Options: These contracts let people buy or sell gold at a specific price, regardless of the commodity's current market value.
- Futures: Similar to options, futures contracts are an agreement to buy or sell gold at a certain price on a specific date.
- Spot: People can spot-buy gold and hold it like purchasing physical gold, but without having to take delivery and store the commodity.
- Forex: Gold-denominated currency pairs like XAU/USD let people speculate on the exchange rate between gold and fiat currencies.
- ETFs: Exchange-Traded Funds (ETFs) are a bundle of assets related to a sector. A gold ETF could contain gold, gold mining companies, and refinement operations.
Choosing the Right Platform for Gold Trading
When selecting a platform for gold trading, it's essential to review each option before choosing a particular option and registering.
It's crucial to consider how you want to trade gold. For example, CFDs, ETFs, options, or futures. Each market caters to various trading goals and strategies, so considering your personal requirements is critical to choosing the right platform.
Another important consideration is fees. Brokers typically charge for opening a position, deposits/withdrawals, overnight financing, and leverage. Such costs can quickly eat into any potential profits, so it's advisable to use a platform like ActivTrades, which is transparent regarding its fees.
Considering other features you desire can also help in the selection process. ActivTrades provides every user with a demo account that can be used to practice gold trading for beginners without risk. Features like a mobile app, responsive customer support, and fast order execution are also paramount.
Brokers like ActivTrades allow users to test their trading interface before registration. The ActivTrades gold instrument page shows a price chart, gold trading times, and contract specifications, making it convenient for people to determine whether the gold trading broker is right for them.
Choosing the best gold trading platform is ultimately a personal experience. Traders should look for a broker that supports their desired method of trading (e.g., CFDs, options, or spot markets), security features, and trading tools. Trading fees are also an important factor and should be as low as possible.
Gold Trading Strategy for Beginners
One of the fundamentals of gold trading is using a strategy to improve performance. People can combine fundamental and technical analysis for gold trading to identify potential opportunities. The best gold trading strategy will vary from person to person, but some examples include:
Short-Term Stochastic Oscillator Strategy
A short-term gold trading strategy could involve using a 30-minute chart, identifying areas of support/resistance by looking for levels that price candles respect to set take profit/stop loss and waiting for the Stochastic Oscillator to hit above/below 80 or 20, which signals a potential reversal.
Fundamental Analysis
Reviewing fundamental factors can aid your trading by signalling how the market feels about gold. The price of gold is typically pushed upward during times of political instability or war as it's a hedge against uncertainty. Traders could buy gold during turmoil and sell it when the market recovers stability.
Breakout Trading
Another method traders can leverage is identifying and trading breakouts of key price levels. Wait for gold to trade sideways, the price to rise/fall through the upper/lower Bollinger Band, and RSI to be above/below 50. This strategy can be applied to multiple time frames.
Gold Trading Tips
While we've already covered the most crucial information, people learning how to trade gold may benefit from a few additional tips, like:
- Hedge Assets like gold are purchased to protect people against inflation, which devalues traditional currencies like the dollar. Traders can use gold as a hedge or speculate on price movements when they expect gold to be popular.
- Key Factors Driving the Price of Gold include banking policies, geopolitical events like war and macroeconomic factors like inflation, exchange rates, or interest rates.
- Active Market Hours are best for trading gold and other assets. Check for periods when one or more trading sessions overlap, as these times have the most liquidity.
- Risk Management is crucial in reducing downside risk. Traders should never risk more than 1-2% of their account per trade and should use stop-loss orders to close positions when a trade performs poorly.
How to Setup a Gold Trading Account on ActivTrades
Prospective traders must set up an account with a broker before they can buy and sell gold. ActivTrades supports gold trading and offers demo accounts, educational resources, and great charting tools. New users can set up an ActivTrades account by:
1. Sign Up
First, head to the ActivTrades sign-up page and create an account by entering a country of residence, name, email, and password.
2. Enter Details
Next, you'll need to enter a few pieces of information. They include your phone number, date of birth, tax number, address, employment status, and financial details.
3. Complete Verification
Afterwards, you'll need to verify your identity by providing a driving licence, passport, or residence permit. Users can upload a photo from their computer or take a picture via mobile.
4. Complete Registration
Your account will be ready after verification. Go to your personal area to view a summary of your accounts and links to key features, such as demo accounts and MetaTrader.
How to Trade Gold on ActivTrades
After creating an account on ActivTrades, you're ready to trade gold on the platform. Just follow these steps:
1. Deposit Funds
Your account must be funded before trading. To do so, click the 'Deposit' button, choose a payment method, decide how much to fund your account with, and complete the deposit. ActivTrades supports bank transfers, credit/debit cards, and E-wallets like PayPal, Skrill, and Neteller.
2. Open ActivTrader Platform
From your personal area, click 'Access Platform' in the 'Platforms' tab. Doing so will bring up the ActivTrader trading interface.
3. Search for Gold
Open your trading account, click the magnifying glass icon, enter 'gold', and click the asset to add it to your watchlist. Drag and drop the gold tile onto the chart to view the gold trading price history.
4. Buy and Sell Gold
Once you've identified an opportunity, click 'Sell' or 'Buy' on the gold tile, enter a lot size, set take profit/stop loss orders, and press 'Place Order' to open a position.
FAQs
What is Gold Trading Explained?
Gold trading involves buying and selling gold to earn a profit. People can trade gold physically or virtually via brokers like ActivTrades.
Can I Trade Gold on MetaTrader 4?
MetaTrader 4 gold trading is straightforward to set up. Connect your MetaTrader account to a broker like ActivTrades, and you'll be able to trade gold from within the software.
What's The Best Indicator for Gold Trading?
Your trading preferences will determine the best indicator for gold trading. The RSI, Bollinger Bands, MACD, and Awesome Oscillator are a few good options.
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