Types of Gold Trading Analysis
There are two types of analysis when trading gold. These two types of market analysis:
- Technical Analysis
- Fundamental Analysis
Technical analysis is the use of trading charts and technical indicators to determine the direction of the gold prices and which trade to open at a particular time.
Technical analysis will involve the study of chart prices movement, technical indicators and various line studies that are used for this analysis.
The study of chart prices include study of chart patterns that form repeatedly and these patterns are studied by technical traders so that when they appear again on the Gold trading charts traders can then know how to interpret these patterns and know which trades to place in the gold market.
There is also the study of candlestick patterns - the candlesticks trading method was developed by traditional Japanese traders and this study is popularly used when trading the online gold trading market. Technical traders will also learn about candlesticks patterns and learn how to interpret these candlestick patterns so that they can use these studies when trading gold online.
The other technical analysis concept used to trade gold is the use of line studies. Line studies are lines placed charts and used differently to generate trading signals.
Support and Resistance lines - these are used to mark support and resistance levels which are potential levels where price might stop or even reverse direction. These levels are used by traders to know where to place trades or determine where to set take profit levels and also stop loss levels. Lines will be used to mark these levels.
Trend lines - because gold prices move in general directions for some time in what is known as trends, traders will use trend lines to determine the trend direction of the gold market and to determine the best place where to open and close a trade based on these trend lines. Upward trend lines show the general market direction is upwards while downward trend lines show that the general market direction is downwards.
Technical indicators - the main tools used by technical analysis traders are indicators. Indicators are tools that are used to calculate the direction of the market trend and the momentum of the market trends.
There are various technical indicators that are used to trade the online gold market and the most popular indicators are
- Moving Averages
- Bollinger Bands
Beginner traders need to learn about these indicators so that they can know how to use these to generate trading signals.
Technical analysis is a wide topic and traders will continue to learn more about technical analysis as they continue reading this gold trading tutorial. Various topics will be covered on their own in the technical analysis concepts section of this website.
Fundamental analysis is the use of fundamental reports otherwise known as economic reports that are coming from the USA to determine whether to buy or sell gold which is traded against the US Dollar.
Fundamental reports will be traded in the format where if the news reports coming from the USA are good for the US, then traders will sell gold and hold their value in US Dollars. If on the other hand the news coming from the USA are bad for the US, then traders will buy gold which is likely to appreciate against the US Dollar because of the bad news reports coming from the USA.
When it comes to fundamental analysis traders will use economic reports such as:
- Trade Balance
- Employment Reports
- Inflation Reports
- Interest Rates
These reports will be used to determine whether to buy or sell gold based on their outcome.
Traders using this method to analyze price movements will need to keep up with the economic reports coming from the USA so that they know which side of the trade to take when trading the online gold market.
Choosing a Trading Method
Traders can decide which of the above analysis to use when trading gold based on what method they prefer. This website will mainly focus on technical analysis methods and traders can learn all the technical analysis topics that they require to know before they start trading gold. Traders can open a demo account and learn how to trade with technical analysis using their demo account. Traders can then practice trading with these concepts on this demo account until when they gain enough knowledge and experience to trade profitably using this technical analysis method.
For fundamental analysis traders need to know about the various economic reports, by using an economic calendar that can be found online, traders can keep up to date with the upcoming news events and then they can learn how to use these economic reports to know what trade to open based on the outcome of these news reports. Traders who decide to use fundamental analysis will have to do some practice on their demo account so as they can gain enough experience on how to interpret these economic reports and know how to trade these reports profitably.