Gold Trading for Beginners

gold trading

The value of gold fluctuates from moment to moment, as it trades on public exchanges where it has a price that is determined by supply and demand. While you don't eat it or drink it, people are attracted to gold. It's been used as a currency because it doesn't corrode, and the material allows for some absorption of light creating that yellow glow.

The reasons people buy or sell gold--creating the demand and supply flow--can be pure speculation, to acquire or distribute physical gold, and as a hedge for commercial application. For traders, the purpose of trading gold is to profit from its daily, weekly or monthly price movements.

How to trade gold?

Trading gold is speculating on its short-term price movements. Physical gold is not actually handled or taken possession of, rather the transactions take place electronically and only profits or losses are reflected in the trading account.

There are a number of ways to trade gold. One of the easiest and most popular ways to trade gold is with CFDs.

A contract for difference (CFD) is a type of contract between a trader and a broker in order to try and profit from the price difference between opening and closing the trade.

Investing in gold online saves you the inconvenience of paying for gold storage. In addition, CFDs give you the opportunity to trade gold in both directions. No matter whether you have a positive or negative view of the gold price forecast and predictions, you can try to profit from either the up- or downward future price movement.

Moreover, trading gold through CFDs is often commission-free, with brokers making a small profit from the bid-ask spread - and traders try to profit from the overall change in price.

Additionally, the 0.2% margin or 1:500 leverage offered by ambroker.com means that you have to deposit only 0.2% of value of the trade you want to open, and the rest is covered by your CFD provider. For example, if you want to place a trade for $1,000 worth of gold CFDs and your broker requires a 0.2% margin, you will need only $10 as the initial capital to open the trade.

You can trade gold CFDs right here, right now. Just sign up at ambroker.com and use our advanced web platform or download the best-in-class investment app to trade on the go. It will take you just 3 minutes to get started and access the world’s most traded markets.

Continue reading or start playing around in a risk-free demo account and start trading gold with virtual funds. Additional, use code WELCOME30 to get a $30 free welcome bonus to start trading gold on a real account. 

Gold Trading Example

XAU/USD (Gold CFD) is trading at 1205.80 (sell price) / 1206.20 (buy price).

You decided to invest in 100 oz. of Gold CFD as you are expecting the price will go up.

Your pip value in this example will be 0.01 x 100 (trade size) = $ 1 

Example 1: Winning Trade

  • You were correct with your prediction and the price of Gold CFD goes up to 1224.50 / 1224.90, you decide to close your winning trade by selling at 1224.50 (current sell price)
  • The price of Gold CFD went up 1830 pips (1224.50 – 1206.20) in your favor.
  • Your profit is ( [1224.50– 1206.20] x 1 $ pip value) = $1830 

Example 2: Losing Trade

  • Your prediction was wrong and price of Gold CFD dropped over the next hours to 1187.90 / 1188.30, you assume that the drop will continue and decide to close the trade at 1187.90 (current sell price) to limit your losses.
  • The price of Gold CFD dropped 1830 pips (1206.20 – 1187.90) against you.
  • Your loss is ([1206.20 - 1187.90] – x -1 $ pip value) = - $1830

Please note, in order to maximize profits and minimize losses, use stop-loss and trailing stop orders available in the MetaTrader 5 platform. 

For further detailed calculations, please consult your personal account manager.

Trading Gold ETFs and Gold Mining Stocks

Another way to start gold trading is through a fund that trades on a stock exchange, like the SPDR Gold Trust (GLD). If you have a stock trading account, you can trade the price movements in gold.

The trust holds gold in reserve, and therefore, its value is reflective of the price of gold. The price of the SPDR Gold Trust is approximately 1/10 of the price of gold. So if gold futures are trading at $1500, then the Gold Trust will trade at approximately $150.

The trust trades like any stock trading. The minimum price movement is $0.01, therefore you make or lose $0.01 for each share you own each time the price changes by a penny. Stocks and ETFs are typically traded in 100 share blocks (called lots) so if the price moves a penny and you are holding 100 shares, you make or lose $1.

If the price moves $1, from $120 to $121, you make or lose $100 on your 100 share position. If you are holding 500 shares, you make or lose $500 on that same price move. The amount you need in your account to trade a gold ETF depends on the price of the ETF, your leverage, and position size in the lot

For trading stocks or ETFs in Indonesia, you're required to have a $1,000 minimum balance in your account. Depending on how much income you want to generate and your leverage, you may wish to have more than $5,000 available to you. 

Gold Trading Platform

MetaTrader 5 is an institutional multi-asset platform offering outstanding trading possibilities and technical analysis tools, as well as enabling the use of automated trading systems (trading robots) and copy trade. MetaTrader 5 is an all-in-one platform for trading Gold Forex (XAUUSD), Gold Mining Stocks and Gold Funds.

MetaTrader 5 allows you to enjoy the freedom of movement to the full extent — you can stay active while trading from smartphones and tablets. The Web Platform provides even more possibilities and allows you to work from any web browser and any device. By choosing the most convenient way from a variety of options, you can trade Gold 24 hours a day!

Additional services expand the functionality of the platform making its capabilities almost limitless. MetaTrader 5 offers the built-in Market of trading robots, the Freelance database of strategy developers, Copy Trading and the Virtual Hosting service (Forex VPS). Use all these services from one place, and access new trading opportunities!

Millions of users around the world choose MetaTrader 5, attracted by the platform's exceptional advantages. For all of these users, we have created the largest community of traders, and we invite you also to join the MQL5.community. On the community website, you can download thousands of free trading robots, subscribe to trade signals and copy deals of successful traders, discuss trading strategies and much more.

Sign up now and join an abundance of gold trading fans!

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Categories:  Investing