What is Trading?

Gold Trading is a term that is commonly used by gold investors & traders to describe activity in the market that is carried out by traders, investors and speculators.

In trading a trader can buy or sell gold. A trader will buy gold if they think the value of the gold is likely to appreciate in the future. A Trader will sell gold if they think the value of the gold is likely to depreciate in the future.

The Market is an over the counter market which means trading is carried out through a network of the big international banks; this trading network is commonly referred to as the interbank network. This interbank gold trading network consists of banks and brokers which are in different locations. These interbank network is responsible for providing the prices at any particular time to the traders and other market participants who want to buy or sell gold. In trading the price is constantly changing and this price is denoted by what is known as a Trading Quote. In Trading the Price is displayed as a Quote. This gold quote is constantly changing and the interbank network will update automatically the current quote and traders can then trade the xauusd at the current price.

XAUUSD Quotes

Xauusd prices of instruments is displayed using Gold Trading Quotes. This is the price at which any trader wanting to trade gold will trade at.

Because prices are constantly changing it means that traders can take advantage of these price movements to make profits by trading these price movements. The price of any gold instrument will keep moving because of demand supply. This is because there are many participants trading gold in the open market and therefore this means that the price quotes will get determined by the current market forces. These market forces may be determined by factors such as an increase in demand for gold.

XAUUSD Pips

In trading the price moves are measured in points commonly known as Pips in the market. The pip is used to calculate the profit or loss that a Trader makes in a particular trade. For example if a trader makes a trade which moves 50 pips in his direction, then the profit of the trader will be calculated as 50 pips. Pip in gold trading is represented as the second last decimal point in the Trading Quote and it is made up of pipettes - pipettes are fractions of a Trading Pip.

XAUUSD Lots

In xauusd trading - gold is traded in units known as lots or gold trading contracts.

Trading Leverage

Because not many traders can afford to trade large units of trading contracts, there is leverage in gold trading which means that traders can borrow money and use the borrowed money to make trades with. For example leverage of 100:1 means that a trader with capital of $10,000 can borrow upto 100 times using the 100:1 leverage option & therefore after borrowing using this leverage the trader will have a total of $10,000 multiplied by 100, which means the trader will have a total of $1,000,000. This leverage is what makes accessible to retail traders because retail traders can begin with little capital of their own & use leverage to borrow the rest of the money required for trading. The money that the trader deposits is referred to as the trader’s margin & a trader can continue borrowing money using this leverage option as long as they have the required margin in their account. This is why traders must have the required trading account balance in their account to open the trades they want to.