Precious metals trading has long been recognized as an appealing investment. While traders tend to focus more on trading strategies for gold, the trade specifications that are very important are often given the least priority. In this article, learn about the trade specification requirements and details for trading gold at the best gold trading platform, Orbex.com.
Trading Gold: Understanding The Basics
Trading Gold CFDs requires a completely different approach than trading currencies. This is simply due to the nature of the way gold prices behave compared to other markets. For most traders, gold and fx are often inter-mixed, especially when it comes to trading strategies.
Without understanding the basics of what is going on in your gold trades, it can be difficult to make consistent profits. The following three points are quite important when it comes to trading gold and something a trader must know at any point in time. This article is specifically focused on the Gold CFD contracts that are available to trade from Orbex.com.
Gold – Specifications
Initial Margin
The initial margin is the amount of collateral required to hold a position in Gold. At Orbex, the initial margin for gold is $1000 for a trade size of 1 lot (100,000). So if you are trading 0.50 lots, your initial margin would be $500, or $100 margin requirement to trade 0.10 lots of Gold.
Why is margin important?
Understanding the initial margin can be beneficial for you to plan your trade size. For example, if you had a trading equity of $1000, then it makes sense to trade with 0.10 lots in Gold, where the requirement margin of $100 is locked in. This leaves you with a free margin of $900.
Minimum contract size
The minimum contract size to trade Gold is 0.10 lots. A 1 standard lot in gold is equal to 100 ounces. Therefore, when you trade, 0.10 lots is trading 10 ounces of Gold.
Understanding the minimum contract size can help you in your position management. Because the contract size or lots are directly related to the required margin, by knowing these details, you would be able to position your trade sizes better based on the trading capital that you have.
Tick Size and value
The minimum tick size is 0.01. At Orbex, Gold is priced in two decimals, such as 1200.12 and so on. Each tick or 0.01 is $1 for a standard lot or $0.10 if you are trading the minimum trading size of 0.10 lots.
The value of the tick size in gold is perhaps the most important. Because each tick is equal to $10 for a standard lot size, you can quickly do the math in terms of knowing how much loss or profit you can make off your trades.
Swaps
When you keep your positions in gold open overnight, then your trades attract overnight rollover swaps. For long positions, the swap on your gold trade is a -0.347 points and for short positions that are kept open overnight, the swaps are -0.236. So when you are trading 1 lot position in Gold, long positions held overnight have -$0.347 (rounded to -$0.35) swap and short positions have -$0.236 (rounded to -$0.24) swap.
An Example of Gold Trading
We purchased 1 lot in Gold at $1250.98. Therefore, the required margin was $1000 and each tick (0.01) is worth $10. So if gold had risen from 1250.98 to 2151, a 0.02 tick move, which would give a profit of $2. Likewise, if gold prices fell from 1250.98 to 1250.68, that is a 0.30 tick move, which is $30 (0.30 x $100).
Why is it important to understand the Gold specification?
Understanding the margin requirements, swaps and tick size can help traders to remove any ambiguity from their trades. By knowing exactly how much you can make or lose on a trade that you hold, including the additional swaps that are applied, traders will be able to use this information to better manage their gold trading positions.
FAQs
Gold trading prices are determined by supply and demand, like all exchange traded markets. So, if the gold market becomes saturated by supply and gold demand doesn't rise to match, the price of gold will fall. And if the demand for gold rises, without an increase in supply, the price of gold will rise.
What is the secret gold trading strategy? ›
In this strategy, a trader would look to buy gold if a shorter-term moving average crossed above a longer-term moving average and sell when the shorter-term moving average crosses below the longer-term average.
What are the fundamentals of gold trading? ›
Get to know what moves gold
There are three primary things that influence gold prices - inflation, investors' sentiment, demand and supply. When the rate of inflation is high, more investors tend to invest in gold since it has traditionally been known to beat inflation. This would lead to a spike in the price of gold.
What indicators to use for gold trading? ›
Relative Strength Indicator (RSI)
RSI is great for confirming a trade decision with gold. If you find an entry for buy position, you can check the RSI value for confirmation. If the RSI is above the 70 level, you may want to reconsider this buy trade, as gold is in overbought territory.
How do you trade gold perfectly? ›
Top Gold trading strategies
- Moving average crossover for a short-term trading strategy.
- Real interest rates for a long-term strategy.
- Fibonacci Retracements.
- Buying the support level.
- Placing stop-losses below the previous low swing.
- Focus on small trades.
- Pay attention to Gold charts.
- Combine the strategies together.
Because gold price is considered to be highly volatile, traders try to make market profits by buying the commodity when the price is low and selling when it is high, or going short the precious metal when prices are expected to fall.
How to trade gold for dummies? ›
Gold investing follows the common rules of buying the investment at a low price and selling at a higher price. There is no interest received for holding gold, so profits are only made on capital appreciation. The gold price tends to rise when the economy takes a downturn and other investments fall in value.
What is the best time frame for gold trading? ›
The experience shows that the most active gold trading hours are between 3 pm and 11 pm GMT+3 (generally, during North American trading sessions). European sessions also come with enough activity although slightly lower if compared to North America. Here, the best gold trading hours are between 10 am and 6 pm GMT+3.
What is the formula for gold trading? ›
1 lot = 100 troy ounces. To calculate the cost of one lot we should multiply 100 by the current price per ounce of GOLD (for example 952.70 USD) => 952.70 * 100 = 95,270 USD.
What trading style is best for gold? ›
Gold trading strategies: moving averages
Moving averages: the moving average aims to smooth out historic price data, calculating the average price over a certain period of time. For example, the 20-day moving average is the average rate over 20 days, and is recalculated each day.
Trade with the trend: Follow the market's direction. Do not trade every day: Only trade when the market conditions are favorable. Follow a trading plan: Stick to your strategy without deviating based on emotions. Never average down: Avoid adding to a losing position.
What is the best RSI setting for gold? ›
For example, if you receive a buy signal, you could check the RSI value. If it lies above 70, you may want to reconsider buying gold, as it is already in overbought territory. A value below 70 would be preferable.
What are the symbols for gold in trading? ›
The symbol for gold in trading is XAU. When trading gold in dollars, the market symbol is XAU/USD.
What is the XAU trading strategy? ›
The concept of this strategy involves identifying and following the prevailing trend in the XAUUSD market. Traders buy when the trend is upward (bullish) and sell or short-sell during a downward (bearish) trend. The main focus is to capture gains through large movements rather than small fluctuations.
Can I trade gold with $100? ›
The amount of money you need to trade gold varies based on the method you choose. In forex, you can start with a relatively small capital, sometimes as low as $100.
Is it profitable to trade gold? ›
Whether it's behaving like a bull or a bear, the gold market offers high liquidity and excellent opportunities to profit in nearly all environments due to its unique position within the world's economic and political systems.
What should I know before selling gold? ›
If you are to sell gold items, make sure you start with coins or bars. However, before you go to sell your gold, make sure you do your research. Confirm that the gold you're trying to sell is real and determine its purity. While diluted gold can often fetch a decent price, it will rarely be as high as pure gold.
How do gold traders make money? ›
Trading gold involves buying the metal with the expectation that price appreciation will make it profitable to sell it later. This can be accomplished by purchasing gold in physical form, such as bars, ingots, or coins, or by investing in financial instruments that monitor the price movement of gold.
