Trading Gold is very similar to trading other currencies. Gold is traded like Forex and even though it is a commodity it is traded by Forex traders and brokers as if it is a currency. Gold is considered an easy place to start for beginner traders. Some of the advantages of trading gold are its high liquidity and its tendency to move in predictable patterns. The gold market is large and relatively stable because one or two big trades do not move the market much at all. It is pretty easy to get a wealth of information about gold and its history and trends.
Gold has been traded for a very long time so it is easy to see the history and look at what has caused the movement in the Gold market. There are a few factors that affect the price of gold and they are consistent. If you watch these issues you can make educated gold trading decisions. These factors are inflation and deflation, supply and demand and the greed and fear of traders.
Many traders trade gold, especially during difficult political times when gold is usually considered a ‘safe haven’ . Retail traders are individuals who tend to place short term trades. Institutional investors are professionals such as fund managers who tend to buy gold when they think prices are low and to hold their positions for a longer term.
There are definitely risks involved in trading gold but they tend to be much less than other forms of currency. It is a more controlled risk but because it is less volatile than other types of trading. The safest way to trade gold is via trading signals. Since gold is such a predictable commodity, you can follow a trading signal provider that has a successful history, use their signals to model your trades and even though you are not guaranteed success, it is likely to work well.
Another common methodology for trading gold is technical analysis. Most traders who use this strategy use candlestick charts and bar charts to guide their decisions. There are a few possible ways to trade using these charts to drive your trading. A trader can trade on the basis of a set upper level and lower level that gold has reached over the last several months. This works well if there are no major global economic changes.
Traders who use the moving average can be profitable on a short term basis. The assumption is that the price will continue to move in the same direction for a period of time. Then the trader will look at the amount of time that this trend is likely to last and trade based on the high and low points of that trend.
A trader can also look at if gold is being overbought or oversold and historical data can be used to make these determinations. Overbuying implies an impending drop in price and overselling suggests that the price will go up soon. This will indicate to investors when to buy or sell.
Once you learn what affects the market, the next step is to understand how to read the charts and the indicators. Reading and understanding these charts will help you predict how the market will move. The next step would be to open a demo account and trade virtually before investing any actual funds in the gold market.