The precious metal gold has been always perceived as a safe haven in times of troubled times.
Our simple gold trading strategy will help you to buy gold and sell gold at the same time. Our proven gold trading approach uses a combination of Fibonacci retracements and seasonality trading.
The best strategy for trading gold or other commodities is to do precisely the same way that smart money trade commodity. Our simple Forex gold trading system strategy is based on what works in the financial markets.
It is basically a strategy that tells you when to get into trades on virtually any time frame whether you’re looking at higher time frames for long-term investment or when do you want to get in and out for very short-term trades.
If you’re concerned about inflation or just the overall economy in general, investing in gold is an excellent way to protect your wealth.
However, if you’re actually trying to make money from the trends in gold that requires, in essence, a method for trading gold at the right moment, we use our simple gold trading strategy.
Gold Trading Strategy:
- Trading gold is much like trading forex if you use a spread-betting platform
- A gold trading strategy can include a mix of fundamental, sentimental, or technical analysis
- Advanced gold traders recognize that the yellow metal is priced in US Dollars and will account for its trend in their gold analysis
Why Trade Gold and What are the Main Forex Gold Trading Strategies?
Once upon a time, trading gold was difficult: you had to buy and sell the metal itself.
Then came futures and options, allowing traders to take positions without actually ending up with a safe full of bars, coins or jewelry.
Gold exchange-traded funds (ETF’s) made it easier still; trading gold was much like trading a stock. If a retail investor uses a spread-betting platform it is simply a matter of buying or selling depending on whether you think that the gold price is likely to rise or fall.
For some people, trading gold is attractive simply because the underlying asset is physical rather than a number in a bank account.
There are a variety of strategies for trading gold ranging from studying the fundamental factors affecting supply and demand, studying current positioning of gold traders, to technical analysis and studying the gold price chart.
Even for those who rely principally on the fundamentals, many experienced traders would agree that a better gold trading strategy is incorporating some components of fundamental, sentiment, and technical analysis.
A gold trading tip we offer is that fundamental and sentiment analysis can help you spot trends, but a study of the gold price chart and patterns can help you enter and exit specific trades.
Trading Gold vs. The Forex Gold Trading System
Gold has traditionally been seen as a store of value, precisely because it is not subject to the whims of governments and central banks as currencies are.
Gold prices are not influenced directly by either fiscal policy or monetary policy and will always be worth something – unlike a currency that can end up being almost worthless because, for example, of rampant inflation.
Gold can also be used by traders as a “safe haven”, along with assets like the Japanese Yen, the Swiss Franc and the notes and bonds issued by the US Treasury. That means that when traders are worried about risk trends they will tend to buy haven assets.
On the flip side, traders tend to generally sell haven assets when risk appetite grows, opting instead for stocks and other currencies with a higher interest rate. This makes gold an important hedge against inflation and a valuable asset.
Note, though, that while it is possible to trade the Swiss Franc or the Japanese Yen against a variety of other currencies, gold is almost always traded against the US Dollar.
Therefore, trading gold means you will need to take into account the movements of the US Dollar. For example, if the value of the US Dollar is increasing, that could drive the price of gold lower. Keep up to date with the US Dollar and key levels for gold by viewing the first widget to the right column of this website.
An additional factor to take into account when learning how to trade gold includes market liquidity. The World Gold Council estimates that average daily trading volumes in gold are higher than in any currency pairs other than EURUSD, USDJPY and GBPUSD.
That makes it higher, for example, than the daily trading volume in EURJPY, so spreads – the differences between buying and selling prices – are narrow making gold relatively inexpensive to trade.
Lastly, gold trading hours is nearly 24 hours per day. Gold exchanges are open almost all the time, with business moving seamlessly from London and Zurich to New York to Sydney and then to Hong Kong, Shanghai and Tokyo before Europe takes up the baton again.
This means liquidity is high around the clock although, as with the Forex gold trading system, it can be relatively quiet after the New York close, with lower volumes and therefore the possibility of volatile price movements.
Trading Gold Using Technical Analysis
Technical traders will notice how the market condition of the gold price chart has changed over the years. Gold prices were in a sizeable trend from 2005 to 2015. Since 2015, gold prices have been trading in a defined range, changing hands between $1,000 and $1,400.
The technique involves matching your technical gold trading strategy to the market condition. If the market is trending, use a momentum strategy. If the gold chart is range bound, then use a low volatility or range strategy. This is a key ingredient in a gold trading strategy.
For those who prefer to use technical analysis, the simplest way to start is by using previous highs and lows, trendlines and chart patterns.
When the gold price is rising, a significant previous high above the current level will be an obvious target, as will an important previous low when the price is falling.
Also in an uptrend, a line on the chart connecting previous highs will act as resistance when above the current level, while a line connecting previous higher lows will act as support – with the reverse true in a falling market.
As for chart patterns, those like head-and-shoulders tops and double bottoms are relevant just as they are when trading currency pairs.
Gold Trading Tips for Beginners and Advanced Gold Traders
Returning to fundamental analysis, the beginner needs to consider one point in particular: is market sentiment likely to be positive or negative? If the former, then the gold price is likely to fall and if the latter it is likely to rise. This is therefore the simplest strategy to use when trading gold.
For the more advanced trader, though, it is important to consider too what is likely to happen to the Dollar. In recent years, the Dollar has become increasingly regarded as a safe haven as well, which explains in part why the gold price in Dollars has remained relatively stable.
Thus if you think, for example, that the geopolitical situation is going to worsen, you might consider buying gold but at the same time selling, say, the Australian Dollar against its US counterpart.
An advanced Forex gold trader will also want to keep an eye on the demand for gold jewelry. In India and China in particular, gold jewelry is still seen as an important long-term investment with industrial uses, as well. Watching the central banks’ buying and selling of gold can also be important – these all factors that can move the price.
That said, all the rules of trading forex also apply to trading gold. Retail traders need to be careful not to over-leverage and to think about their risk management, setting targets, and stops in case something goes wrong.
Our Principal Gold Trading Tips:
- Consider whether the markets are in “risk on” or “risk off” mode;
- Look at the likely performance of the US Dollar as well as the gold price;
- Consider a mix of fundamental, sentimental, and technical analysis;
- Watch out for central bank buying or selling;
- Consider the demand for gold jewelry;
- Look at the industrial demand for gold;
- And take account of the supply position.
Why Trade Gold?
Gold has long been valued by societies all over the world for its inherent lustre and malleability.
Today, traders treasure gold (XAU/USD) because it is often viewed as the ultimate safe-haven asset, usually weathering market turbulence and retaining its value in periods of uncertainty.
Traders also use gold to hedge against inflation and diversify their investments because gold often reacts differently to market stimuli than other assets.
Gold is often viewed as:
- the ultimate safe-haven asset,
- weathering the market,
- an item to hold during financial turbulence,
- and retaining its value in periods of uncertainty.
What Influences the Price of Gold?
Interest rates: Historically, one of the most reliable determinants of gold’s price has been the level of real interest rates, or the interest rate less inflation.
When real interest rates are low, investment alternatives like cash and bonds tend to provide a low or negative return, pushing investors to seek alternative ways to protect the value of their wealth.
On the other hand, when real interest rates are high, strong returns are possible in cash and bonds and the appeal of holding a yellow metal with few industrial uses diminishes.
One easy way to see a proxy for real interest rates in the United States, the world’s largest economy, is to look at the yield on Treasury Inflation Protected Securities (TIPS).
The U.S. dollar: One of the biggest points of contention for gold traders is on the true correlation between gold and the U.S. dollar. Because gold is priced in U.S. dollars, it would be logical to assume that the two assets are inversely correlated, meaning that the value of gold and the dollar move opposite to one another.
Unfortunately, this overly simplistic view of the Forex gold trading systemcorrelation does not hold in all cases. Periods of financial stress can cause the both the U.S. dollar and gold prices to spike rapidly. This is usually because traders will buy both gold and the U.S. dollar as safe-haven assets in these periods of uncertainty.
A Short-Term Forex Gold Trading Strategy
As with any trading instrument, there is no single “best” way to trade gold. Many traders from other markets have found that the technical trading strategies they employ on other instruments can easily be adapted to the gold market, especially given gold’s tendency to form durable trends.
For short-term traders, a classic way to try to profit from the frequent trends in gold is to use a moving average crossover strategy.
In this strategy, a trader would look to buy gold if a shorter-term moving average crossed above a longer-term moving average and sell when the shorter-term moving average crosses below the longer-term average.
A 10/60 moving average crossover on the 1hr chart can be a strong combination for shorter-term traders.
Historically, these settings have allowed traders to successfully trade the middle portion of a trend, though there is no guarantee of future performance.
Binary Options and Trading
Binary options are an alternative way to play the foreign currency (FOREX) market for traders.
Although they are a relatively expensive way to trade compared with the leveraged spot Forex trading offered by a growing number of brokers, the fact that the maximum potential loss is capped and known in advance is a major advantage of binary options.
Binary options have two outcomes: They settle either at a pre-determined value (generally $100) or at $0.
This settlement value depends on whether the price of the asset underlying the binary option is trading above or below the strike price by expiration.
Binary options can be used to speculate on the outcomes of various situations:
- Will the S&P 500 rise above a certain level by tomorrow or next week in Forex gold trading system?
- Will this week’s jobless claims be higher than the market expects?
- Or will the euro or yen decline against the U.S. dollar today?
For example, say gold is trading at $1,195 per troy ounce currently and you are confident that it will be trading above $1,200 later that day.
Assume you can buy a binary option on gold trading at or above $1,200 by that day’s close, and this option is trading at $57 (bid)/$60 (offer).
You buy the option at $60.
If gold closes at or above $1,200, as you had expected, your payout will be $100, which means that your gross gain (before commissions) is $40 or 66.7%.
On the other hand, if gold closes below $1,200, you would lose your $60 investment, for a 100% loss.
Buyers and Sellers of Binary Options
For the buyer of a binary option, the cost is the price at which the option is trading. For the seller of a binary option, the cost is the difference between 100 and the option price and 100.
From the buyer’s perspective, the price of a binary option can be regarded as the probability that the trade will be successful.
Therefore, the higher the binary option price, the greater the perceived probability of the asset price rising above the strike.
From the seller’s perspective, the probability is 100 minus the option price.
All binary option contracts in Forex gold trading systemare fully collateralized, which means that both sides of a specific contract – the buyer and seller – have to put up capital for their side of the trade.
Therefore, if a contract is trading at $35, the buyer pays $35, and the seller pays $65 ($100 – $35). This is the maximum risk of the buyer and seller, and equals $100 in all cases.
Binary options for Forex Gold Trding are available from exchanges such as Nadex, which offers them on the most popular pairs such as USD-CAD, EUR-USD and USD-JPY, as well as on a number of other widely-traded currency pairs.
These options are offered with expirations ranging from intraday to daily and weekly.
The tick size on spot forex binaries from Nadex is 1, and the tick value is $1.
The intraday forex binary options offered by Nadex expire hourly, while the daily ones expire at certain set times throughout the day.
The weekly binary options expire at 3 P.M. on Friday. For forex contracts, Nadex calculates the expiration value by taking the midpoint prices of the last 25 trades in the forex market, eliminates the highest five and lowest five prices, and then takes the arithmetic average of the remaining 15 prices.
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