How to start trading Gold (Precious Metal) on FXCM platforms? Table of Contents
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What is Gold Online Trading?
Gold is an extremely unique substance compared to other chemical elements found on Earth.
It is scientifically classified as a transition metal, has an atomic number of 79, and is symbolized on the periodic table by the letters Au.
The ingot has several distinct physical qualities that distinguish it from other metals:
- Extreme malleability
- A soft texture promotes extreme malleability. For example, 28 grams of the substance can be beaten into a thin sheet of 17 square meters.
- Brilliant
- Characterized by a bright yellow color, gold does not tarnish and does not corrode. This is particularly useful in the making of jewelry, art, and decoration.
- Ductile
- Similar to its extreme malleability, gold is also very ductile. In fact, 28 grams of gold (one ounce) can be pulled into 80 kilometers of wire five-millionths of a meter thick.
Given these physical attributes, the yellow metal has advanced utility, particularly in medicine, art, jewelry, and electronics.
As a result, consumer demand for gold gives it intrinsic value, which plays many roles in the world of finance.
From active trading to portfolio management, it enjoys a position second to none as a financial guarantee.
Why you should trade Gold online?
If you are looking for a reason to trade gold, perhaps this old adage will help you: “Gold has never been worthless!” The saying is true and reinforces the historical perceptions surrounding the ingot.
It has served as a species, a reference for fiat currencies, and amassed as a reserve asset – all because it has been coveted by man since the dawn of civilization.
In fact, there is a multitude of reasons to trade gold.
Regardless of an individual’s market goals, bullion can be used to meet them.
Below are the two main reasons gold trading is an attractive pastime for legions of market participants around the world.
1. Accessibility
When it comes to trading any asset class, market accessibility is an important consideration.
Each type of security has specific barriers to entry that affect how it is bought or sold.
The rise of the digital market has brought a wealth of options within reach of those looking to trade gold.
The following are the most popular methods:
- Spot Markets
- Exchange-Traded Fund (ETF)
- Futures and Options
- Forex
- Contracts for Difference (CFDs)
- Equity
Whether you are interested in ETFs, buying physical bars, or trading XAU / USD, all you need is a broker, venture capital, and internet connectivity.
Compared to the past, the barriers to entry on gold have dropped dramatically.
How to start trading Commodities, Gold, Oil on FXCM?
2. Liquidity
No matter where you travel, the term gold is synonymous with value.
All over the world, both traders and investors respect it as the foundation of finance.
Gold’s historical position, not to mention its constant consumer demand, makes it one of the most liquid assets in the world.
In practice, the physical bullion is readily convertible into cash, as are derivative products.
On over-the-counter (OTC) forex, XAU / USD is one of the most popular spot pairs, although real volume data is elusive.
However, London Precious Metals Clearing Limited (LPMCL) clearing statistics estimate monthly trades of between 18 and 20 million ounces in bullion from its five members for the first half of 2019.
This is a staggering figure and suggests that there is a strong institutional demand for the yellow metal.
Gold futures and options trading data are more standardized.
For example, CME gold futures regularly hit 200,000 traded contracts per session, which represents a value of over US $ 28.9 billion.
While institutional capital will certainly play an important role in CME gold futures trading, the strong volumes indicate that retail operators are also present in large numbers.
Start investing in Gold on FXCM
How to start investing in Gold online?
The dawn of the digital market has removed the challenge of gaining access to the gold market.
Buying or selling physical gold, trading gold derivatives, or investing in gold stocks and ETFs can easily be done on a personal computer.
You can also sell unwanted jewelry online to participate directly in the bullion market.
Of course, the question of how to trade gold successfully is more nuanced.
There are literally thousands of ways to accomplish this task, and choosing the right one can be daunting.
However, gold trading success becomes much more likely through training, action planning, and selecting the right product.
Step 1 – Understand the basics of the Gold market
Global bullion markets are constantly evolving with varying degrees of complexity.
For anyone interested in entering these venues, it is essential to have a basic education regarding the value of gold.
Here are some key concepts to consider before embarking on the gold markets:
- Economic Cycles
- Both economic expansion or contraction can be the main drivers of participation in the gold markets. In times of expansion, investment levels generally decline when investors take a risky stance, preferring higher-yielding stocks, such as stocks. During times of contraction, gold becomes a sought-after commodity. For example, during the 2008-12 global financial crisis, bullion doubled in price from USD 869.75 per ounce (2008) to USD 1664.00 (2012).
- Participants
- When looking at gold-related stocks, it is important to remember who the other market participants are. Institutional traders have a great deal of influence, with central banks, hedge funds, and governments act in the market. In the event that institutional capital takes a public position, rapid price movements are possible.
- Demand and Offer
- The main reason gold is valuable is its inherent scarcity. It exists in the earth’s crust with a density of 5 parts per billion ensuring that large concentrated quantities are rarely found. In turn, supplies grow at a relatively constant annual rate, making value largely a product of prevailing demand.
Keeping up with these market fundamentals is an ongoing process for active traders. Changes in any of these elements can greatly affect the global dynamics of gold, whether bullish or bearish.
Register with FXCM to trade Gold online
Step 2 – Build a trading plan
A global trading plan is crucial to achieving long-term success in any market, not to mention bullion.
From traditional buy-and-hold investment strategies to high-frequency approaches to CFD products, the trading plan is a vital part of any venture in the gold markets.
A solid trading plan includes parameters designed to govern market entry/exit, as well as risk and money management.
In order to develop such a framework, it is necessary to consider:
- Resorces
- Taking an honest inventory of the amount of time and venture capital available for gold trading is the first step to building a plan. Access to adequate resources ensures that a plan has a legitimate chance of success.
- Targets
- Clearly defining trading goals gives the plan a purpose. Without a purpose, it becomes difficult to measure progress and resolve any issues that could affect performance.
- Methodology
- Once the available resources and objectives have been quantified, a suitable trading strategy can be adapted or created. A feasible trading strategy must be tailored to inputs and objectives; otherwise, its integrity is compromised and performance will most likely suffer.
The global trading plan promotes consistency and creates a verifiable statistical track record.
When implemented correctly, a detailed plan effectively eliminates the element of luck in terms of profits and losses.
Step 3 – Select a Location
The beauty of gold as a trading model is its flexibility and diversity of offerings.
Regardless of the resources, objectives and methodology, a suitable product is available.
For example, if you are interested in holding gold as a long-term hedge against inflation, buying physical bars is one way to go.
If the goal is to generate regular income, then day trading XAU / USD or GOLD CFDs is one possible way to achieve this.
After selecting a target market or product, you need to secure the services of a broker to facilitate trading activities.
This requires due diligence. A broker must be reputable, competent, and in compliance with the law; if not, you need to find a suitable alternative.
What influences the price of the gold market?
The global trading price of gold is sensitive to a variety of factors.
Issues such as geopolitical tensions, fluctuations in currency values , or macroeconomic uncertainty are all capable of increasing the volatility of bullion prices.
Due to the high public interest, fundamentals that distort the perception of economic or political stability are very likely to affect prices.
Below are some market drivers that are able to drive gold prices in a directional way:
- Economic boom or recession periods
- Armed conflicts
- Financial crises
- Institutional stocks
- Supply chain disruptions
- Government regulation
By far panic and euphoria are the main catalysts behind the movements in gold prices.
In the event that there is uncertainty in the market, prices generally rise due to the position of the bars as a safe haven asset.
Conversely, when consumer populations and investors gain confidence in prevailing economic conditions, values stagnate or decline.
For both scenarios, the perception is very real and prices often follow suit.
The 5 Factors of Gold Market Price
Some Tips on Trading Gold Online
As in all other trading areas, there is no “holy grail” to conquer the gold markets.
True arbitrage opportunities are rare and fleeting, leaving a performance in the hands of the individual.
Successful gold trading is typically rooted in discipline, consistency, and perseverance.
Without these, a foray into the bullion markets is most likely short-lived.
There are some practices that reduce the pitfalls and promote competent trading.
Here are some gold trading tips that can improve long-term performance:
- Apply leverage consciously: The number one enemy of inexperienced or aggressive traders is becoming financially overexposed. Whether trading gold futures, XAU / USD, or related CFDs, applying leverage consistently and carefully is essential to achieving longevity in the market. Keep in mind that leverage is a double-edged sword and can greatly amplify your profits. It can also dramatically amplify your losses. Trading currencies / CFDs with any level of leverage may not be suitable for all investors.
- Stay up to date: The bullion market is a dynamic atmosphere. It is always a good idea to stay abreast of geopolitical, monetary, economic, and industry-specific issues.
- Avoid panic-trading: Led by gold, commodity markets exhibit a constant sensitivity to panic-trading. A historical example was the Black Friday collapse of gold on September 24, 1869, where values plummeted by more than 16% within minutes. While the volatility of panic-trading is attractive to those looking for large profits, the ability to buy the top and sell low increases significantly.
- Adhere to a plan: The number one piece of advice anyone can give about trading gold is to build a plan and stick to it. While a plan isn’t as strong as it could be, the structure eliminates random risk-taking, negative emotional impacts, and inconsistent trading.
Gold is a unique asset that provides active traders with flexibility and a variety of options not found elsewhere in finance.
When approached from a conscious perspective in the context of a global plan, trading gold can be valuable in pursuing almost any financial goal.
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Comment by Diletta
March 26, 2024
Awesome bonuses, good leverage. A few hiccups, but support rocks!