One of the oldest and most reliable types of money is gold. For traders, gold is a popular investment and a fantastic method to diversify a portfolio because of its inherent worth or “safe haven” appeal. Gold trading strategy discussed
One of the most widely used trading instruments for both swing and intraday traders is gold. There are numerous tactics for trading gold, but some are more crucial than others.
In this post, we’ll take a closer look at some of the most widely used gold trading tactics.
These tactics will aid you in starting your gold trading career off on the correct foot if you are new to it. Our gold trading school, which you can sign up for FREE, is even better for novice traders.
However, if you are an experienced trader, these tactics could be able to assist you hone your present strategy and boost your performance.
Why is Gold a Valuable Commodity to Trade?
A very liquid trading asset is gold. In 2021, it predicted that gold would have an average daily trade volume of $130 billion. The majority of gold trading done over-the-counter in a number of centres.
The advantage of trading a highly liquid trading asset like gold is that spreads will typically be reduced (compared, for instance, to platinum and palladium, which are far less liquid) and traders will be able to make huge trades without significantly affecting the market.
While there is no doubt that the price of gold can fluctuate, most of the time the market is liquid enough to limit excessively erratic price changes.
Gold is a terrific tool for diversification, and this is true for all types of investments. When there aren’t many trading opportunities in their preferred asset classes, traders who are heavily invested in stocks or currencies may find it advantageous to occasionally look at other trading instruments.
The price of gold is influenced by a number of variables, and traders can take advantage of this.
What is a Gold Trading Strategy?
First, let’s examine what a trading strategy is.
A trading strategy can be characterised as a set of guidelines that aid in choosing when to enter, manage, and close a deal. Depending on the trader, a trading strategy may be relatively straightforward or extremely complex.
A trader may be able to employ the exact same trading technique for gold if they already have one. But occasionally, your current trading approach might not be the best choice.
For instance, given that gold often has more volatility, a range trading technique that works well with currency pairs that typically experience lower volatility, such as EUR/GBP, will likely perform poorly in this situation.
Testing your trading technique in a risk-free demo environment is the most effective approach to learn. You have access to fictitious money inside the demo environment, so keep in mind that success there might not be exactly replicable in real time on the live MT4 platform.
For all traders, the most important gold trading methods
Below is a List of Our Top 6 Gold Trading Strategies
Position trading, first
Strategies for trend trading
A day trading plan
Price action trading
Copy trading and expert advisors
When trading stocks, you frequently check at news about the company or the sector. When trading currencies, you will be paying attention to economic news and events that are pertinent to the nation whose currency you are using. With gold, things become a little more challenging. Several variables can affect the price of gold, including:
Geopolitical changes – Because the precious metal is often regarded as a haven, its value tends to increase when there are conflicts on the world stage.
Fears of inflation – When investors are concerned about rising inflation, gold typically increases because holding cash becomes less appealing.
The US Dollar and Gold have an inverse connection with regard to monetary policy. Thus, the anticipation of higher interest rates in the US will strengthen the Dollar and put pressure on Gold. The US Dollar may weaken while gold prices increase on the other hand, should US rate expectations drop.
Actual supply and demand: Although trading in gold CFDs, futures, and ETFs gained popularity, physical gold still used to make jewellery and for investments (e.g. coins and bars). The demand for these goods will also affect the price of gold.
Thus, using fundamental analysis in gold trading necessitates keeping an eye on a variety of global events and trends. For medium- to long-term traders, this is appropriate.
Trading in News
Even while this relates to fundamental analysis, the term “news trader” refers to investors who trade a particular occurrence and may only hold the relevant position(s) for a few seconds or minutes. While unexpected incidents can sometimes affect the price of gold, there also scheduled events like economic data releases and central bank meetings that can have a substantial impact.
Strategies for Trend Trading
Finding trade chances in the trend’s direction is a key component of trend trading methods. It’s based on the notion that the trading instrument will keep moving in the direction that it is currently heading (up or down).
We speak of an upswing when prices are continually rising and recording higher highs. An opposite trend indicated by falling prices (the trading instrument is making lower lows).
The good news is that gold frequently experiences strong trends because of its tendency to be fairly volatile. The graph below displays instances where gold experienced a strong trend, both upward and downward.
When using a trend trading strategy, traders frequently use technical indicators. Some of the most well-liked signs will discussed later in the text.
Day Trading Approach
Unlike scalpers, day traders often do not hold trades for just a few seconds. Their trading day, however, also focuses on a certain session or hour of the day when they attempt to take advantage of possibilities. While day traders frequently utilise charts from the M15 up to the H1 chart, scalpers may employ an M1 chart.
While day traders often take things a little slower and look for two to three solid opportunities per day, scalpers typically open more than ten trades every day (some extremely busy traders may even wind up with more than one hundred).
Because gold is a highly liquid trading instrument, the spreads are reasonable (particularly when compared to other commodities), and the volatility is high enough most days to provide trading opportunities, it is appropriate for day trading.
Trading using Price Action
Instead of using technical indicators, price action trading focuses on making decisions based on the price fluctuations of a particular item (e.g. RSI, MACD, Bollinger Bands). A trader can use a range of price movement tactics, including breakouts, reversals, and basic and complex candlestick patterns.
It has the advantage of being simple to deploy across all timeframes. For instance, a swing trader would place a trade based on a breakout (the same pattern) on an H4 chart as opposed to a day trader trading a breakout in gold on the M15 chart.
Copy Trading and Expert Advisors
There are many expert advisors (EAs) designed expressly for trading gold. Traders can duplicate these signal providers through a variety of copy trading programmes. At the same time, there are signal providers who specialise in gold trading. This technique is better suited for novice traders or more seasoned traders who don’t think their current approaches work with gold and don’t have the time to create new ones.
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