Day trading Gold – Is it advisable?
Frequently, Forex traders look into other financial markets to diversify their investment. Among the first areas, they tend to look to is normally the valuable metals like Gold and Silver. Several Forex brokers also offer spot Gold and silver trading to the Forex traders on their platform. You can trade these attractive assets through your Forex broker. The traders have a different approach to trade gold and silver for a profit.
Is it advisable to day trade Gold?
The answer to our question: “Is it advisable to day trade gold?”, yes, of course! There are several big companies out there trading in the gold futures market, as well as the spot market all over the world. For day trading purpose in this article, we will refer to the spot chart. There is a slight pricing difference between the spot price and future price because of the time involved with a futures contract. But you can trade either one very much the same.
Select your market
There are various methods to trade gold, for example, spot gold at your Brokerage, trading gold options, trading the futures contracts of Gold. The widely traded version of gold is future contracts and spot gold. However, you should know, there are advantages and disadvantages of gold trading in the futures market and spot market.
Spot gold price typically moves up to $5 to $15 a day. Depending on the size of your position, this can bring significant or loss. However, in the Gold futures market, it is a standardized contract. You trade 100 ounces in a contract, so it has a fixed value per tick. Each tick indicated a change of $0.10 in price. Hence based upon contract size of 100 ounces, each tick variation in the market changes your contract’s value by $10.
The Gold Futures markets are more liquid and better to trade than the spot market. The future contracts have an extraordinarily tight spread. It’s usually one tick. In the spot market, the spread is quite large, from $0.10 to $0.50, and therefore, it puts the trader at a disadvantage. However, in a dynamic market where the price varies up to $5 to $15 daily, the traders can overcome the issue of higher spread. In the spot market, you have the flexibility of changing your lot size while day trading gold.
Gold Trading Advantage
Every trader is different; everybody needs a different approach to trading gold. There is absolutely no one solution that suits every trader, and because of this, you must think about your position thoroughly before putting money for day trading Gold. When you can afford to trade bigger positions, then the futures marketplace is the right place to trade for you. You should consider the spot metals market if you have a smaller sized account.
Ultimately, you will see the gold will trade like other things. It has fundamental conditions that drive it, mostly the US Dollar fundamentals. When the US dollar weakens; it could send the gold price to rise. However, if the united states dollar strengthens a lot, the gold price should fall.
Central banks always buy this precious metal, and it is their favorite. Gold has remained the most attractive investment since ancient times. It has significantly appreciated over the past many years, so it’s most unlikely that its price will reduce in the long term. Yes, there may be short term price fluctuations depending on market fundamentals and political developments, which in fact, the opportunity for day traders to make money.