Gold trading is perhaps the most difficult trading instrument to earn a profit from since it moves less frequently than other commodities and currency pairs. It is the oldest and most trusted currency as well. Nevertheless, one may still profit from this market with the appropriate trading strategy. As it does not move so frequently, intraday and swing traders are mostly keen on trading in this currency. Gold is an extremely liquid currency that generates $130 billion (2021) every day.
In this article, we will share those strategies for making a profit by trading gold.
What Are Your Thoughts on Gold?
Gold has a correlation with other traded commodities and currency pairs. When there is uncertainty in the market for other commodities, gold’s price is believed to increase. Likewise, when the rate of the US dollar goes down, the price of gold will rise. The question arises as to how traders trade in such situations. The strategy is that when the currency market tends to go up, the traders invest in it by mobilising their resources from gold. And when the currency market tends to go down, they just buy gold to mitigate any possibility of losses.
Keep Your Eyes on the News
Most traders trade gold by studying the stats, but gold trading is not safe to trade just on the basis of statistics. The most important factors that make the gold market volatile are, emotions (greed and fear), supply & demand, inflation & deflation, and government policies (global news). There are various other factors that can impact gold trading, such as political turmoil, economic drawdowns, global disasters, terror attacks, or any other crisis.
Gold’s price fluctuates in an unpredictable way. Gold trading depending on news may well be profitable after a large release or event. You should always keep an eye on the news platforms while you trade gold, just to be updated. We strongly recommend you not execute a trade immediately after any event, since you cannot anticipate whether the price will increase or decrease. You need to study the nature of the market or get an expert’s opinion in such situations.
Create Your Trading Strategy From Scratch
It is time to develop a strategy for trading now that you have acquired knowledge about the factors that affect gold trading and gold associations. Before you can build an effective trading strategy, you must take time to study the market and its loopholes, probabilities, and possibilities. Depending on your preferences and the circumstances, your approach might be either technically or fundamentally oriented. You may even devise a plan that incorporates both.
According to the seasonal pattern-
- Gold’s price increased at the beginning of the year. Therefore, consider buying gold in January and the first week of February.
- March has been seen as the worst month for gold trading. Therefore, trades should be closed during the final week of February.
The aforementioned parameters of bonus tips are subject to change at any point. Check the market’s trading behaviour prior to trading.
Due to the particular characteristics of gold, specific approaches are required to trade it. Consider the different factors that might adversely impact your gold trading experience.