trade Gold

Learn to trade Gold The Right Way In 4 Steps

Thu Feb 18 2021 08:24
Whether you are a bullish or bearish trader, gold is everyone's consideration in the market. This is such a special commodity, whose demand will never dip and it will drive the whole economy. As this precious metal offers higher liquidity to the market, it brings in many chances. 

Gold is among the oldest commodity that people are trading amid its high intrinsic value. As compared to others, there are only a few factors that affect gold and that's why it is high in demand. 

Trading gold is an art and there are certain things that everyone should know about this metal. If you are a beginner at gold trading or only want to know how to trade gold right, you are at the right place. In this article, we will have a look at four main steps that will make your gold trading profitable.  

Taking full advantage of the Gold fluctuation 

Before jumping into the main steps, you need to understand that gold is not a static commodity. It means, gold brings in high liquidity that offers many earning opportunities. Many beginners leave too much money on the table but leave open chances. 

To take the full advantage, you need to know about the characteristics of gold and how it functions. Unlike beginners, experienced traders leverage four major steps while they trade gold. These strategies not only help traders save more margin on gold but also make trading faster.  

Step 1 - Gold moving entities 

The first step you need to know about the factors that influence the movement of gold. Gold is not that commodity that will move with ease like the stock market. 

There are only a couple of reasons why this precious metal reacts in the market and experts know about them. Major factors that move gold in the market are: 
  • Inflation 
  • Deflation
  • Greed and fear 
  • Supply and demand 
Unlike other stocks in the market and commodities, gold has a special attachment. We can say that people have certain emotions when it comes to gold because it's finite.  

Experts' take on it: 

Beginners and other retail traders feel the risk when they trade gold with these feelings. But in reality, there is some other major factors that is controlling the fluctuation of gold. The very common real-life scenario is that when any selloff happens, the gold rallies. 

Many traders think that fear is the major trigger that drives the gold, but it's not a complete truth. On the other side, experts' look at the long-term vision to make a decision. 

Many gold experts say these above four factors do affect the gold prices but its all temporary. People should not break their long term perspective by looking at a short-term dip or rise.  

Analysis plays a major role 

Both fundamental analysis and technical analysis play a major role in bringing clarity. Before you take a buy or sell decision, you need to check the factors to sense the market.  

Step 2 - Know the crowd 

Gold is different from any other stock or commodity and everyone wants to get involved in this metal. We can say that a variety of crowd gets attracted to gold and trading practices. Gold bugs are the main crowd that moves the market in a strong way. Gold bugs or we can call them gold experts that trade gold in huge quantities. 

They are the long-term players that don't panic when the market fluctuates and go wild. Their portfolios have the majority of gold and less of other commodities or stocks. The main thing to learn from gold bugs is the long-term vision for the gold entity. 

Gold bugs: 

These gold bugs offer great liquidity to the gold market as they keep the gold stocks flowing. They offer a constant supply of buying interest at lower prices as compared to others. 

Short sellers also get benefits from the gold bugs as they get to trade gold for short term and make profits. In such an emotional market, where greed & fear are drivers, short-sellers get involved.  

Institutional investors 

Along with gold bugs, this precious metal also grabs the interest of institutional investors. The thing that we need to learn from them is their strategy to buy gold and make a profit out of it. Institutional investors prefer to buy gold with currencies in the market. 

This bilateral investing strategy is also known as risk on & risk-off strategy. This bilateral strategy brings in an extra layer of safety as the investment has a right combo. By combo or combination, it means the right pair that can match growth and provide safety.   

Step 3 - Long-term vision 

The third most important thing that beginners should follow is a long-term strategy. Gold is an evergreen asset and the demand for this commodity will never fade away. 

If you were not reading the gold-chart before investing, it's time to read it and gather data from it. If you want to do hands-on, you can take the previous gold performance chart of 100 years and see the growth signs. You will never see that gold has ever given any kind of negative returns.  

Other commodities like crude oil can go negative at a point, but gold can't. You will also notice gold trends where it has not given any noticeable returns. The point here is to learn how the gold pattern repeats after a specific time. Once you learn how to read the charts, you will have a much clear idea about gold investing.  

A clear picture of gold history 

If you check the history of gold until 1970, gold has shown only a little movement. After the gold standard removal for the dollar, the precious metal got into an uptrend. In Feb 1980, the gold touched the mark of $2,076 an ounce and in mid of 1980, it touched $700. 

It was a massive dip in the prices of gold during Feb 1980's range. From this, we can learn to keep a long term vision for this commodity and fret about the sudden drops.  

Step 4 - Choosing the venue  

If you notice the market liquidity, it follows gold trends and it grows up and down as per the gold movement. This is the kind of oscillation that affects the futures markets on a major level. This oscillation influences the futures market to a greater degree, more than the equity markets. 

For example, CME Group offers a total of three gold futures contracts of 100 oz, 50oz, and a 10 oz. As per Oct 2017, the mini contracts were out of trends as compared to the other contracts. Here you need to take care of which gold contract will bring you more profitability.  


These were the top four steps and concepts you can follow and bring more profitability with gold. Whether you are looking for trading tips for beginners or you are already an expert, keep these gold investing strategies in mind to get started. Gold investing is more robust and performance-driven if done in the right manner. 

If you were not trading gold then you can diversify your portfolio and add gold commodity into it. Get started with gold trading with these 4 steps to thrive in this market.  

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