What is XAUUSD in the forex market? Do traders want to learn about gold trading strategies? In this article, Learn Forex Trading will provide you with the necessary information about XAUUSD. Choose a forex exchange from concepts, characteristics, benefits, and risks to how to read charts. At the same time, apply world gold price trading tips from professional traders.
What does XAUUSD stand for?
XAUUSD is a currency pair in forex trading. It is abbreviated from XAU (ISO code of gold) and USD (ISO code of US dollar). XAUUSD represents the value of one ounce (28.35 grams) of gold relative to the US dollar.
Concept of XAUUSD in Forex Trading
Forex trading is the activity of buying and selling currency pairs on the international financial market, to make profits from exchange rate fluctuations. Forex trading can be done through forex exchanges. These are places that provide traders with tools, services, and conditions to participate in the market.
XAUUSD is one of the most popular currency pairs in forex trading. Because gold is a precious asset, has high value, and has a great influence on the world economy. Trading forex through gold, also known as trading gold. This is a form of buying and selling gold on the forex market, with the unit of measurement being ounces of gold.
What benefits does trading XAUUSD bring to traders?
Trading gold is an attractive option for many traders not only because of its high value but also because it offers many benefits.
XAUUSD is an effective haven asset
XAUUSD is considered a haven asset. Because it can retain value and sustainability during times of instability, crisis, or inflation. When other assets such as stocks, bonds, or currencies lose value. At the same time, many investors will switch to buying gold to preserve capital and avoid risks. Because in reality, despite major economic fluctuations, gold still has a relatively stable value
This increases the demand and price of gold, and vice versa, when the market stabilizes, the price of gold will decrease. Therefore, trading gold allows traders to take advantage of fluctuations in gold prices according to market trends.
Trading gold has very high liquidity
Trading gold has very high liquidity because gold is a widely traded asset in the forex market, with a large and continuous trading volume. According to a report by the World Gold Council, the gold trading volume in the forex market in 2019 was about 145 billion US dollars per day, accounting for about 5% of the total forex trading volume. This means traders can buy and sell gold easily, quickly, and at low costs.
XAUUSD limits the risk of inflation
XAUUSD limits the risk of inflation. Because gold is an asset with a limited supply, it cannot be printed or created like currency. Gold is also not affected by countries’ monetary policies, such as interest rates, money printing, or bond trading.
Therefore, the value of gold is not lost over time, but on the contrary, tends to gradually increase. Trading gold allows traders to protect their accounts from currency depreciation, and increase profitability.
See more: World gold price and interesting thing about gold
Characteristics of XAUUSD
XAUUSD is a currency pair with many unique characteristics. Traders need to understand clearly to be able to trade effectively.
Exchange rate of gold in Forex trading
The exchange rate of gold in forex trading is expressed in XAUUSD. That is the value of one ounce of gold compared to US dollars. The exchange rate of gold is determined by market supply and demand. As well as other factors such as political, economic, social, and investor psychology. The exchange rate of gold often fluctuates strongly, creating many trading opportunities for traders.
How much is 1 lot of XAUUSD converted into?
How much 1 lot of XAUUSD is converted into depends on the type of lot the trader uses. In the forex market, there are three main types of lots:
Standard lot: 1 XAUUSD standard lot is equivalent to 100 ounces of gold, or 100 XAU.
Mini lot: 1 XAUUSD mini lot is equivalent to 10 ounces of gold, or 10 XAU.
Micro lot (micro lot): 1 XAUUSD micro lot is equivalent to 1 ounce of gold, or 1 XAU.
Traders can choose the lot type that suits their account size, risk level, and trading strategy.
Is trading XAUUSD risky?
Is trading XAUUSD risky or not is a question that many traders are interested in. Because no transaction is without risk. Trading gold also has its risks, which traders need to understand and deal with.
Disadvantages of trading Forex gold
Some disadvantages when trading forex gold are:
- Trading gold has higher transaction costs than other currency pairs because the spread (difference between buying and selling prices) of XAUUSD is usually wider. This means traders have to pay more fees per trade, and it is also harder to achieve profits.
- Trading gold has lower leverage than other currency pairs. Because gold is a highly valuable and highly volatile asset. This means that the trader must have more money in the account to be able to open a trading position. At the same time, there is also the risk of a margin call (lack of margin) if the market moves in the opposite direction.
- Trading gold is influenced by many unpredictable factors, such as politics, economics, society, and investor psychology. This means that the price of gold can change suddenly and dramatically, creating unpredictable swings and reversals. Traders need to regularly monitor important news and events, and have a good risk management plan.
What issues should you pay attention to when trading with XAUUSD?
What issues do you need to pay attention to when trading with XAUUSD? This is a question that many traders ask. Traders need to have knowledge, skills, and experience to be able to trade effectively.
Factors Affecting Gold Forex Prices
Factors affecting the forex price of gold are factors that affect the supply and demand of gold in the market. Some factors that impact gold forex prices are:
- Political situation: When there are conflicts, wars, crises, or political instability, many investors will look to gold as a haven, increasing the demand and price of gold.
- World economic situation: When there are recessions, inflation, or economic crises, many investors will buy gold to preserve capital and avoid currency devaluation, increasing the demand and price of gold.
- World social situation: When there are epidemics, natural disasters, or climate change, many investors will buy gold to cope with risks and uncertainties, increasing the demand and price of gold.
- Investor psychology: When there are concerns, fears, or confusion, many investors will buy gold to find peace of mind and trust, increasing the demand and price of gold.
Appropriate XAUUSD trading strategy
A suitable XAUUSD trading strategy fits the trader’s goals, style, and abilities. Some popular XAUUSD price trading strategies are as follows.
Some common XAUUSD trading strategies
- Trend following strategy: This strategy is based on identifying and monitoring the trend of world gold prices. Traders open trading positions in the direction of the trend.
- Divergence trading strategy: This strategy is based on identifying and taking advantage of divergences between gold prices and technical indicators. Thereby, predicting reversal points in gold prices. This strategy is suitable for medium-term traders because it allows traders to catch peaks and troughs in gold prices. Traders will open a trading position against the current trend when there is a divergence between the price and the indicator.
- News trading strategy: This strategy is based on monitoring and reacting quickly to important news and events. Information that affects gold prices such as interest rates, money printing, bond trading, or economic reports. This strategy is suitable for short-term traders because it allows traders to take advantage of short-term trading opportunities.
Best XAUUSD trading session of the day
The best XAUUSD trading session of the day is the trading session that has the greatest fluctuations in gold prices. Creates many trading opportunities for traders. The forex market operates 24 hours a day, divided into four main trading sessions:
- Asian session: From 11 pm to 8 am GMT. Including countries such as Japan, China, Hong Kong, Singapore, and Australia. This trading session has the lowest trading volume, and gold prices are usually less volatile.
- European session: From 8:00 a.m. to 5:00 p.m. GMT. Including countries such as Germany, France, the UK, and Switzerland. This trading session has the highest trading volume, and gold prices often fluctuate strongly, especially when there is important news and events from Europe.
- North American session: From 13:00 to 22:00 GMT. This trading session also has high trading volume, and gold prices also fluctuate strongly, especially when there is important news and events from the US.
- Pacific session: From 10 pm to 7 am GMT. Includes countries such as New Zealand, Fiji, and the Pacific islands. This trading session has low trading volume, and gold prices are usually less volatile.
Instructions on how to read and understand common gold trading charts
Instructions on how to read and understand common gold trading charts are important skills. However, traders need to be able to analyze and forecast trends and entry and exit points of gold prices. There are many different types of gold trading charts, but the three most common are:
- Line chart: This chart represents the price of gold with a continuous line, connecting the closing price points of each period.
- Bar chart: This chart shows gold prices with vertical columns, each column representing a period. This chart provides a lot of information about the price of gold but is harder to see and more complicated than a line chart.
- Candlestick chart: This chart shows the price of gold using candles, each candle representing a period. This chart provides a lot of information about the price of gold and also shows the psychology of the market.
In addition, traders also need to know how to use other technical analysis tools to supplement gold trading charts.
See more: Instructions for registering an Exness account
How to trade forex through gold?
To trade forex through gold, traders need to have a forex trading account, a reputable forex trading exchange, and a professional forex trading platform.
Choose a reputable Forex exchange with many advantages when trading XAUUSD
Choosing a reputable forex exchange with many advantages when trading world gold prices is an important step. A reputable forex exchange with many advantages when trading XAUUSD is a forex exchange that:
- Owns a license from a reputable financial agency.
- Reputable and long-term experience in the field of forex trading.
- Have good security and customer protection policies, and do not interfere with traders’ transactions.
- There are favorable trading conditions for traders.
- Diverse types of trading asset products.
- Have a professional and stable forex trading platform.
- Has good, fast, and professional customer support.
- List of reputable Forex trading exchanges
Some reputable forex trading exchanges with many advantages when trading XAUUSD are:
- Exness: Is one of the largest and most reputable forex exchanges in the world. Established in 2008, and holds licenses from FCA, CySEC, and FSA.
- XM: This is one of the leading forex exchanges. XM has low spreads, high leverage, no trading fees, no withdrawal fees, and many trading products. Includes XAUUSD and other currency pairs, as well as other asset classes.
- FBS: Is one of the most famous and reputable forex exchanges in the world. Established in 2009, and has licenses from CySEC and IFSC. FBS has many trading products, including XAUUSD and other currency pairs.
How to trade XAUUSD on a real account of a Forex exchange
To trade XAUUSD on a real account. Traders need to have a forex trading account, and deposit money into that account. Then, traders need to apply the following steps:
- Log in to the forex trading platform of the exchange you have chosen.
- Select the XAUUSD currency pair in the list of trading products. Then, open the gold trading chart to analyze and forecast the trend and entry and exit points of the gold price.
- Select the type of trading order you want to execute.
- Choose the trading position size you want to open. This is the number of XAUUSD lots I want to buy or sell. Trading position size depends on account size, risk level, and trader’s trading strategy.
- Choose a stop loss and take profit level for your trading position.
- Confirm trading orders, and track your trading positions on the forex trading platform.
Successful gold trading tips from professional traders
Some tips for successful world gold price trading from professional traders that you can refer to:
- Learn technical and fundamental analysis of gold prices. Thereby it is possible to forecast the trend and entry and exit points of gold prices and choose an appropriate trading strategy.
- Learn how to manage risks and accounts, so you can control risks and profits. At the same time, avoid common mistakes, such as trading too large, trading too much, or trading based on emotions.
- Learn trading psychology to maintain a positive spirit and attitude. At the same time, cope with market pressures and challenges.
- Learn how to practice and improve your trading skills, by using a virtual demo trading account, reviewing your trading history, and learning from other successful traders.
Conclude
So the above article, Learn Forex Trading has informed you about XAUUSD. This is the information that traders need to know when trading forex through gold. Hopefully, this article will help you gain the necessary knowledge and skills to trade gold successfully.
FAQs:
What is XAUUSD?
XAUUSD is a currency pair in forex trading. It is abbreviated from XAU (ISO code of gold) and USD (ISO code of US dollar).
What is trading gold?
Trading gold is a form of buying and selling gold on the forex market, with the unit of measurement being ounces of gold.
How to trade gold effectively?
To trade gold effectively, traders need to have knowledge, skills, and experience in technical and fundamental analysis of gold prices.
