XAUUSD Basics Concepts
Learning to trade the xauusd market is much easier for beginners when beginners start by learning the gold trading basics. This way the other xauusd trading concepts become much easier to learn because the new gold trader will have already learnt about the basic ideas before proceeding to the other gold trading concepts.
The gold basics that traders should learn first before starting gold trading are:
What's Gold?
Gold is the simultaneous buying and selling of one financial instrument for another. Gold traders buy and sell for speculation purpose and for the purpose of trying to make a profit. Traders will buy gold that they think will appreciate in value and sell gold which they think will depreciate in value.
In Gold, 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 gold you must learn to buy undervalued gold and sell overvalued gold. Many Gold 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 stocks when the stock price is low & sell stocks when the stock price is high. This is the same trading 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 gold trading symbol.
What's a XAUUSD Quote?
Because gold is traded in symbols, the xauusd trading price at which these gold are exchanged is determined by the gold trading quote.
Gold is quoted in the format of decimal places.
What's a Pip?
Gold is quoted in the format of decimal places. Second last decimal place represents a Pip which is the smallest movement used to calculate profit & loss in gold market moves.
Pip means Gold Price Interest Point: it's a one point move in the gold trading quote.
What's 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 gold lots & the Micro gold lots which are fractions of the gold trading mini lots.
What's XAUUSD Trading Leverage?
Because not many traders can afford to trade standard gold lots which require a lot of money to trade, there is gold trading leverage in Gold which means that traders can borrow money and use the borrowed money to make trades with. For example gold leverage of 100:1 means that a trader with capital of $10,000 can borrow up to 100 times using the 100:1 gold leverage option & therefore after borrowing using this gold trading 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 gold leverage is what makes Gold accessible to retail xauusd traders because retail traders can begin with little capital of their own & use gold trading leverage to borrow the rest of the money required for trading. Money that the trader deposits is referred to as the trader’s margin & a trader can continue borrowing money using this gold 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 XAUUSD Trading Margin?
Margin is the particular amount of money that a trader is required to put aside in order to continue holding an open gold trading leveraged trade. Margin can also be explained as the deposit a trader is required to keep so as to maintain his open positions. This margin is a percentage of account equity that has to be set aside and allocated as a margin deposit for the open positions that are held by a gold trader.
