XAUUSD Basics Concepts

Learning to trade the market is much easier for beginners when beginners start by studying the basics. This way the other advanced concepts and tutorials become easier to learn because the beginner trader will have already learned about the basic ideas before proceeding to the other learning concepts.

The basics that traders should learn first before starting trading are:

What's Gold?

Gold is the simultaneous buying and selling of one financial instrument for another. Traders buy and sell for speculation purpose & for the purpose of trying to earn a profit. Traders will buy gold that they think will appreciate in value and sell gold which they think will depreciate in value.

In XAUUSD, traders buy gold when they become undervalued and sell gold when they become overvalued. This is the basic concept of trading gold, as a beginner if you want to become successful when trading you must learn to buy undervalued gold and sell overvalued gold. Many traders miss this concept and do the exact opposite buying overvalued gold because that is when these gold seem to be moving up and up and they sell undervalued gold because these gold seem as if they will continue to move lower.

Just like in stock market successful trader buy stock when the stock price is low & sell stock when the stock price is high. This is the same concept which traders should follow when trading gold.

What's a XAUUSD?

Gold trading is the simultaneous exchange of one financial instrument for another, for this reason gold is traded in symbols known as trade symbol.

What's a Quote?

Because gold is traded in symbols, the price at which these gold are exchanged is determined by the trading quote.

Gold is quoted in the format of decimal places.

What is a Pip?

Gold is quoted in the format of decimal places. Second last decimal place represents a Pip which's the smallest movement used to calculate profit and loss in market moves.

Pip means Price Interest Point: it's a one point move in the trading quote.

What is a Lot?

Gold is traded in units known as lots. There is also the Mini lot which is made up of fractions of the standard lots & the Micro lots which are fractions of the trading mini lots.

What is Leverage?

Because not many traders can afford to trade standard lots which require a lot of money to trade, there's trading leverage in Gold which means that traders can borrow money & 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 up to 100 times using the 100:1 leverage option & therefore after borrowing using this trading leverage the trader will now control a total of $10,000 multiplied by 100, which means a trader will have total of $1,000,000. This leverage is what makes accessible to retail traders because retail traders can start with little capital of their own & use leverage to borrow the rest of funds required for trading. Money that the trader deposits is referred to as the trader's margin and a xauusd trader can continue borrowing money using this leverage option as long as they have the required margin in their trading account. This is why traders must have the required account balance in their account to open the trade transactions they want to.

What's Margin?

Margin is the particular amount of money that a trader is required to put aside in order to continue holding an open trading leveraged trade. Margin also can be explained as the deposit that a gold trader is required to keep so as to maintain this open trade positions. This margin is a percent of trading account equity that has to be set aside & allocated as a margin deposit for the open trade positions that are held by a xauusd trader.

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