How To Succeed in Trading Gold? | Is gold trading better than stock trading ?
Gold trading has existed for centuries and can be lucrative if one understands the tricks of trading its market. While some individuals might choose to buy the precious metal and store it as an investment in banks, others opt to trade it and profit from its unique standing in the global commercial market.
The gold market is enormous and characterized by high liquidity, creating many opportunities to profit for all. Gold trade allows you to speculate through futures, equity, and options markets. For example, some platforms will allow you to trade gold CFDs with leverage. This means your capital receives a boost, thus boosting your potential gains tremendously. However, as much as your gains are multiplied, so are your losses if you get it wrong. Therefore, you need to understand a few things that can help you succeed when it comes to trading gold.
Mastering Technical Analysis
The first step you need to take before entering the gold market is to learn how to trade. Trading can be done on the spot or futures market. Either way, you need to know when to buy and sell. It is not guesswork, and if you try to, you will end up losing all your capital. Platforms such as PrimeXBT will provide their users with plenty of free resources they can use to learn how to trade gold successfully. These include blog posts, webinars, and other materials. Also, you can opt to buy a paid course that will teach you how to trade. Check for reputable courses; otherwise, you will likely get ripped off.
Technical analysis involves study charts using indicators to determine which direction the price of gold is likely to take within a given timeframe. Here you will have to use TradingView to chart the asset by drawing support and resistance lines plus dynamic S/R lines. Also, you will use indicators such as EMA, RSI, MACD, ADI, and many others to determine the likely direction before taking a position. Short and long tools help you determine your take profit and stop loss.
Practicing sound risk management will also help you not get your account wiped out if things don’t go your way. You can also buy trading signals from reputable experts and use bots to enter and exit positions. But that cost money. A platform such as PrimeXBT offers a copy trading module where you can copy top traders’ strategies and enjoy their success. This is one of the easiest ways to earn from the gold market for beginners as they improve their skills with time.
What To Look Out For With Fundamental Analysis
Technical analysis goes in hand with fundamental analysis. The latter has
something to do with factors influencing the gold market, such as global demand. Since the 1970s, the demand for gold has quadrupled every year, driving up the asset price. Also, since many individuals see gold as a stable store of value, its price tends to rise when there is a crisis, like during the onset of the Covid 19 pandemic. People began to move money from cash assets to gold. However, when an investment becomes too popular, a price bubble can be created, sending prices spiraling when it bursts.
Also, you can check out interest rates since when they rise, the price of gold tends to fall because investors turn to stocks and fixed income assets that will earn them capital. Conversely, when rates fall, the prices of gold rise as economic uncertainty makes investors turn to gold as a safe haven to protect their wealth.
Another thing to watch out for is the US dollar which has an inverse relationship with gold. When the dollar falls, investors rush to buy gold, which drives its price up. And finally, you need to consider financial stress and political instability. During these times, gold is seen as a safe-haven investment, pushing its prices up.