XAU USD Basics

Gold trading is the exchange of the metal xau/usd for US Dollars. Traders can earn money when xauusd prices are heading up or moving down. When market is moving upwards a xauusd trader will buy the metal gold, when gold is moving downward a gold trader will sell the metal gold.

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Gold Price Quotes

The xauusd gold price quotes illustrate and represent the exchange rate at which the gold metal will be exchanged for dollars. Gold metal is measured in ounces and the exchange quotes represent the price per ounce of gold.

In the realm of online trading, Gold is commonly quoted as XAUUSD, where XAU stands for the commodity itself and USD represents United States Dollars.

If the price per one ounce of gold is $1130 then this will be represented by the quote symbol of Gold and the quote price will be denoted as 1130.00 - a xauusd quote will have 2 decimal points added to the gold price to represent the quote price up to the cent.

If gold is quoted at $1130 per ounce, this indicates that a gold trader can purchase one ounce of gold for $1130. Conversely, selling gold or XAU/USD means the trader will receive $1130 for every ounce they sell.

Gold Lots or XAUUSD Contracts

In trading xauusd online - gold is transacted in lots or batches. 1 lot of xauusd will comprise of 100 ounces of gold. XAUUSD is traded in lots so that to increase the value of profit per one pip movement. When xauusd is transacted in lots of 100 then a 1 cent movement will give a xauusd/gold trader profit of $1. In gold price the least movement is one point & this one point is equal to 1 cent.

In online xauusd gold trading, no one actually exchanges gold bars for cash: instead, xauusd is traded with contracts/lots representing the same gold value. Traders will buy or sell these gold contracts/lots based on the exchange price and do these deals from their gold trading accounts. If a trader has enough money in their xauusd/gold account, they can start trades and open xauusd contracts.

Leverage

To trade gold contracts which are traded and transacted in lots of a hundred ounces, then a trader would need to have an account balance of $113,000 - one ounce of xauusd is equal to $1130 therefore 100 ounces will be equal to $113,000.

Most retail investors typically do not possess sufficient funds to invest substantial amounts. This scenario is where leverage becomes beneficial, as brokers provide it to traders.The most common leverage is 100:1 which means that a trader can borrow up to 100 times more the amount which they deposit as their trading capital. For illustration a trader with an account balance of $2,000 can borrow upto 100 times this amount - thenceforth the trader will have a total of $200,000 dollars to transact with. With this leveraged amount a trader can then afford to buy 1 lot of xauusd which is equal to $113,000 & even have an extra $87,000 dollars of this leveraged amount.

Gold trading is popular with regular investors because of this leverage, which lets them trade much larger amounts with only a small amount of their own money. The possibility of profit is increased for a trader in the gold market with such leverage. Still, this trading leverage also makes a gold trader's potential losses bigger.

Margin

Margin refers to the amount of money that a broker requires to enable you to trade using leverage. This is the initial deposit you make in your account before starting trades: for instance, if you deposit $2,000, that amount serves as your margin.

Calculating Profits in Gold Trading

In gold trading, a single point movement - representing the smallest possible increment in the price quote - is equivalent to one cent. When gold is transacted in bulk quantities of one hundred ounces, this 1-point XAUUSD price shift translates to a value of $1 (calculated as 1 cent multiplied by 100).

This means if gold changes from 1130.00 to 1130.50, that 50-point change in price means a gold trader will profit $50 from the trade.

If the price of xauusd goes up $2, from $1130 to $1132, then a trade earns $200. It usually goes up about $2 to $3 each day.

Bid/Ask Price

Bid - price when you sellAsk - price when you buy

The bid/ask price might be given as 1130 for example. 00/1130. The price at which you sell is 1130, which is 30. 00, and you pay 1130. 30 for it.

Spread

The spread is the difference between the bid price and the ask price. For example, if the bid price is 1130.00 and the ask price is 1130.30, the spread would amount to 30 points.

Consequently, the spread signifies the disparity between the price at which you purchase and the price quoted by the broker for selling.

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