May 29, 2020 Last updated May 29th, 2020 1,950 Reads share

6 Essential Tips for Trading Gold

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There was a time when trading gold was considered to be really difficult as one had to physically buy and sell gold. This buying and selling of the metal physically was a daunting task and was not much appreciated by many as it involved a lot of logistics risk. With time things changed and there came the futures and options which allowed traders to take positions without going anywhere and dealing with gold bars, coins, or jewelry.  Now gold exchange traded funds (ETF) have made it easier and trading gold was just like trading a stock. Today gold trading is easy and not much different than trading stocks or foreign exchange.  Now one needs to simply choose a better platform and preferably a spread betting platform and then it is simply a matter of buying and selling gold irrespective of what you think whether the gold price is likely to rise or fall it doesn’t matter. 

Trading gold is preferred by many and is attractive since the underlying asset is physical as compared to others as a number in a bank account. When it comes to trading gold there are different strategies to adopt which can range from studying the fundamental factors affecting supply and demand, studying current positioning of gold traders, technical analysis, and many more. Different retailers and investors incorporate different strategies ranging from studying fundamentals, sentiment and technical analysis. These details can help you to spot trends and study the gold price chart and patterns which can help you enter and exit gold trades. Let us understand and study few tips and tricks which can help you understand gold trading better and book some profits.

1. Always keep the size of your investments which is your gold, silver and mining stock trading positions small. Look for the strategy that higher the changes of being correct than bigger the positions can be and this is the reason that the size of long term investments are bigger than the sizes of short term trades. 

2. Consider whether the markets are in “risk on” or “risk off” mode as this will help you in analysing the stock perfectly. Your stock trading totally depends upon whether the current situation is in favour or against your trade. You need to be practical while dealing in gold stock and thus risk on market may signify to defer you buying while the risk off period can be a good time to buy or otherwise when you need to understand the signals.

3. Pay attention to volume and it is an important factor while making investment in gold or while trading gold. It is something which is often overlooked and is not paid much attention. However, it is an important piece of information and see if a rally is accompanied by a rising volume than it can result into a bigger rally. In a similar way if a rally is accompanied with a declining volume than it is likely to be an ending. One needs to understand these patterns better to make a strong decision whether to invest at the right time or not.

4. Pay attention to different cycles and turning points while trading. Different markets behave in different manner which you need to pay attention to and this is important for a trader. Many markets have cyclical nature which means USD index and Silver options and these cycles can be of great help in your short term and long term trades.

5. Trade with New York close in mind is always a good strategy when dealing in gold trading. Since gold is a 24 hour market however the peak liquidity is found during the New York trading hours. Thus, depending upon your trading goals, you need to decide whether you should trade during or after New York trading hours. It is totally dependent on the trader whether he/she would like to trade during the peak activity or the off hours of trading.

6. Consider paying importance to trend lines and trend channels. This is important while dealing in gold trading as these trend lines and channels can prove useful as support and resistance levels in gold, silver and mining stocks. The lows or highs are used for creating a given trend line or channel depending which one can invest and see how lucrative it is to invest as per these patterns. One needs to understand them better and look for the right investment and withdrawal signals.

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Shweta Aadhya

Shweta Aadhya

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