Forex gold is one of the most attractive and popular trading products in the foreign exchange market. Gold is not only a highly valuable commodity but also a haven asset in times of economic crisis. However, to be able to play forex gold successfully. Traders need to understand basic knowledge and practical experience about gold trading. This article Learn Forex Trading will share with you how to trade gold in Forex.
How to trade gold in Forex and what traders need to know
To start trading gold effectively, traders need to understand the following basic information.
What is Forex gold trade?
Forex gold is the trading of gold on the foreign exchange market. Gold is traded in pairs with the US dollar, with the trading code XAU/USD. The trading unit of gold is ounces, equivalent to 31.1035 grams. When you trade 1 lot of XAU/USD, you are trading the equivalent of 100 ounces of gold.
Trading gold on the foreign exchange market has many advantages compared to traditional gold trading. You can trade gold 24/5, without having to bear the cost of storing and preserving gold. Thereby, traders can take advantage of leverage to increase profits and can make money from both increasing and decreasing trends in gold prices.
See more: How to play forex to trade successfully
Popular ways to trade gold in the market
There are many different ways to trade gold in the market. Depends on each trader’s analytical method and strategy. SomeForex guide for beginnersThe most common are:
- Gold trading using technical analysis: This is a way to trade gold based on the use of tools such as charts, indicators, price models, trendlines, support and resistance, etc. To determine trends and levels. order entry, take profit level, and stop loss level.
- Gold trading using fundamental analysis: This is a gold trading strategy based on monitoring and analyzing factors that affect gold prices. These factors include interest rates, inflation, demand and supply, US dollar,…
- Gold trading on news: This is a way of trading gold based on quickly reacting to important news that affects gold prices. This news is often economic reports, central bank meetings, and political events.
How does Forex gold gold trade impact the financial market?
Gold is a special commodity, that has a strong impact on the financial market. Gold has an inverse relationship with the US dollar. That is, when the US dollar weakens, gold prices will increase and vice versa.
Gold also has an inverse relationship with interest rates. That is, when interest rates increase, gold prices will decrease and vice versa. This is because interest is the opportunity cost of holding gold. When interest rates are high, investors will tend to sell gold to switch to more profitable assets such as bonds and stocks.
Gold also has a positive association with risk factors. That is, when there are high-risk factors in the world such as war, crisis, and market fluctuations,… gold prices will increase and vice versa. This is because gold is a haven asset, sought by investors when there is instability in the world.
Share how to trade gold in Forex
After understanding the gold market and the factors that affect the price and price of gold. Traders need to apply how to trade gold in Forex to optimize profits and minimize risks.
Experience in trading gold at the appropriate time and time frame
One of the ways how to trade gold in Forex is to choose the right time and time frame to trade gold. Timing and time frame affect the volatility, precision, and risk of gold trading.
- The right time to trade gold is when the market is highly volatile. There is a lot of important news and the participation of many investors. You should avoid trading gold at times when the market is less volatile and has little news and few investors, such as weekends, holidays, etc.
- The right time frame to trade gold depends on your goals, strategy, and trading style. If you are a short-term trader, you can use small time frames such as 5 minutes, 15 minutes, 30 minutes, etc. to take advantage of quick and frequent trading opportunities. If you are a medium-term trader, you can use medium time frames such as 1 hour, 4 hours, etc.
Observe the impact of the USD when trading gold
Another how to trade gold in Forex is to observe the impact of the USD when trading gold. The USD is the international reserve currency, used to buy and sell gold on the market. Therefore, the USD has an inverse relationship with gold prices. That is, when the USD weakens, gold prices will increase and vice versa.
To observe the impact of the USD when trading gold, you can use tools such as:
- US Dollar Index (DXY): This is an index that measures the value of the US dollar compared to a basket of other currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish dollar, and Swiss dollar.
- Currency pairs that involve the US dollar: These are currency pairs that have the US dollar as the base or bond currency, such as EUR/USD, GBP/USD, USD/JPY, USD/ CAD,…
How to trade gold according to world economic and political news
Another easiest gold trading strategy is to trade gold according to world economic and political news. World economic and political news are important events that impact the financial market in general and gold prices in particular.
This news is often economic reports, central bank meetings, political events, etc.
To trade gold according to world economic and political news, you need to do the following:
- Follow the economic calendar.
- Analyze and forecast the impact of news.
- Respond quickly to the news.
How to trade gold in Forex according to the law of supply and demand
One last how to trade gold in Forex that I want to share with you is to trade gold according to the law of supply and demand. The law of supply and demand is the basic law of economics. This applies to all types of goods, of which gold is no exception. The law of supply and demand says that when supply decreases or demand increases, prices will increase and vice versa.
To trade gold according to the law of supply and demand, traders need to do the following:
- Track gold supply and demand indicators.
- Analyze and forecast gold supply and demand trends.
- Gold trading follows gold supply and demand trends.
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Experience in gold trading and things to note for traders
Traders can apply these experiences and tips to improve the results of their gold trading strategy.
- Have a clear gold trading plan: This is the most important thing when you trade gold. You must have a clear gold trading plan. Including trading goals, trading strategies, analytical methods, order entry rules, profit-taking rules, stop-loss rules, capital management, and psychological management.
- Continuously improve and update market knowledge. You should also learn from successful traders. From your own and other people’s mistakes, from practical experiences,…
- Control risks and manage capital effectively: This is what determines your survival in the gold market. You must control risk and manage capital effectively. Thereby protecting your account from unexpected fluctuations in the gold market.
- Develop strong gold trading psychology: This is what will help you trade gold confidently and comfortably. You must develop a strong gold trading psychology. The goal is to not be influenced by negative emotions such as fear and greed.
This article Learn Forex Trading has shared with you how to trade gold in Forex. Hopefully, this article will help you gain more knowledge and effective and safe gold trading strategies.
FAQs:
What is Forex gold trade?
Forex gold is the trading of gold on the foreign exchange market. Gold is traded in pairs with the US dollar, with the trading code XAU/USD.
Impact of the dollar on gold prices?
The USD is the international reserve currency, used to buy and sell gold on the market. Therefore, the USD has an inverse relationship with gold prices. That is, when the USD weakens, gold prices will increase and vice versa.
When is the easiest time for gold traders to make profits?
The right time to trade gold is when the market is highly volatile, has a lot of important news, and has the participation of many investors.
