Gold Trading Introduction - Gold Trading Online Introduction to XAUUSD Trading
Gold trading online is gaining popularity among online traders. Gold is one of the financial instruments provided for trading online that a trader can choose.
With this popularity it means gold as a financial instrument is liquid enough to be traded on the online markets. Because of the many traders are now trading this metal online it means there is always someone willing to buy or sell their gold contracts at any time of the day when gold trading market is open.
This liquidity has also led to formation of trends in the price movement of gold. These trends mean that gold can be analyzed using technical analysis and traders can determine which direction the market price of gold is likely to move in.
Gold now is liquid enough to be traded as a financial instrument in the online market and this has led to many online brokers providing gold as one of the financial instrument that traders can trade through the broker's online trading platform.
The main online brokers offering gold as a financial instrument that can be traded are forex brokers. Forex brokers have been providing currency trading services to traders because the currency exchange market is the largest financial market and the most liquid. This is why currency prices move in trends - because of this liquidity. The currency traders who trade forex use technical analysis to analyze the direction of these trends and then place trades on the currency market so as to make profits from this price movements.
Now that gold has gained a lot of popularity, gold prices now also form trends that can be traded and analyzed. This liquidity in gold has led to the formation of these price trends. The liquidity also means that there are enough traders willing to buy or sell at any time when the gold market is open.
The chart below shows the price chart of gold. Traders will trade gold using this price chart.
Gold Price Chart
About Gold Trading Charts
From the chart above a trader can quickly determine the direction of the gold prices from the price movements.
The first part prices are moving upwards in an upward trend, then they start to move down in a downward market trend and then finally the prices move upward in an upward market trend.
As a beginner trader wanting to trade gold you will have to learn how to analyze these market movements.
For example on our chart above we use the moving average crossover trading system which is a combination of two moving averages and these two moving averages are used to show the direction of the market trend.
If both moving averages are moving upwards then the direction of the gold prices is in an upward trend. In an upward trend a trader will buy gold and make profit as the prices of gold continue moving upwards.
The moving averages will also show when the trend is changing direction. In the example above when the two moving averages stop moving upwards and crossover each other this shows the upward trend has reversed and traders should close all their open trades.
After the moving average crossed over each other the two averages then changed their direction and started moving downwards. In a downward trend a trader will sell gold and make profit as long as gold prices continue to move downwards.
In the above example there is also the RSI indicator. This indicator has a center line marked 50, when this indicator is above the 50 mark prices are bullish, when RSI is above 50 mark it means prices are generally closing higher than where they open meaning the price movement is bullish. When RSI goes below 50 mark it shows prices are closing lower that where they open meaning the prices are bearish.
Technical Analysis of Gold Trading
When it comes to gold trading traders will use technical analysis and technical indicators like the ones shown above to determine the direction of the market prices. After determining the direction of the market prices a trader will then open trades in the direction of the trend.
If the trend is upwards then a trader will open buy trades and if the market trend is downward a trader will open a sell trade.
Buying is known as going long and selling is known as going short.
Traders can make profit when the market is trending upwards or downwards. When the market is trending upwards a trader will buy gold - this is known as going long. When the market is going downwards a trader will sell gold - this is known as going short.
Trading Gold Contracts
In the online market gold is traded as contracts, no physical gold is exchanged. When it comes to contracts - one gold contract is equivalent to 100 units.
If the unit used to measure gold is ounce, then one contract of gold that is traded in the online exchange market represents 100 ounces of gold.
In the chart above the price of gold is represented on the chart. The price of gold will also have two decimal points and this is the format used to quote the price of gold.
The historical prices of gold will be used to draw a chart. This price chart is then used by traders to determine which direction the market trend is likely to continue moving in. Traders will analyze the chart price movement using technical analysis and technical indicators.
The gold chart is the main tool used to trade gold.