Precious metals trading has long been recognized as an appealing investment. While traders tend to focus more on trading strategies for gold, the trade specifications that are very important are often given the least priority. In this article, learn about the trade specification requirements and details for trading gold at the best gold trading platform, Orbex.com.
Trading Gold: Understanding The Basics
Trading Gold CFDs requires a completely different approach than trading currencies. This is simply due to the nature of the way gold prices behave compared to other markets. For most traders, gold and fx are often inter-mixed, especially when it comes to trading strategies.
Without understanding the basics of what is going on in your gold trades, it can be difficult to make consistent profits. The following three points are quite important when it comes to trading gold and something a trader must know at any point in time. This article is specifically focused on the Gold CFD contracts that are available to trade from Orbex.com.
Gold – Specifications
Initial Margin
The initial margin is the amount of collateral required to hold a position in Gold. At Orbex, the initial margin for gold is $1000 for a trade size of 1 lot (100,000). So if you are trading 0.50 lots, your initial margin would be $500, or $100 margin requirement to trade 0.10 lots of Gold.
Why is margin important?
Understanding the initial margin can be beneficial for you to plan your trade size. For example, if you had a trading equity of $1000, then it makes sense to trade with 0.10 lots in Gold, where the requirement margin of $100 is locked in. This leaves you with a free margin of $900.
Minimum contract size
The minimum contract size to trade Gold is 0.10 lots. A 1 standard lot in gold is equal to 100 ounces. Therefore, when you trade, 0.10 lots is trading 10 ounces of Gold.
Understanding the minimum contract size can help you in your position management. Because the contract size or lots are directly related to the required margin, by knowing these details, you would be able to position your trade sizes better based on the trading capital that you have.
Tick Size and value
The minimum tick size is 0.01. At Orbex, Gold is priced in two decimals, such as 1200.12 and so on. Each tick or 0.01 is $1 for a standard lot or $0.10 if you are trading the minimum trading size of 0.10 lots.
The value of the tick size in gold is perhaps the most important. Because each tick is equal to $10 for a standard lot size, you can quickly do the math in terms of knowing how much loss or profit you can make off your trades.
Swaps
When you keep your positions in gold open overnight, then your trades attract overnight rollover swaps. For long positions, the swap on your gold trade is a -0.347 points and for short positions that are kept open overnight, the swaps are -0.236. So when you are trading 1 lot position in Gold, long positions held overnight have -$0.347 (rounded to -$0.35) swap and short positions have -$0.236 (rounded to -$0.24) swap.
An Example of Gold Trading
We purchased 1 lot in Gold at $1250.98. Therefore, the required margin was $1000 and each tick (0.01) is worth $10. So if gold had risen from 1250.98 to 2151, a 0.02 tick move, which would give a profit of $2. Likewise, if gold prices fell from 1250.98 to 1250.68, that is a 0.30 tick move, which is $30 (0.30 x $100).
Why is it important to understand the Gold specification?
Understanding the margin requirements, swaps and tick size can help traders to remove any ambiguity from their trades. By knowing exactly how much you can make or lose on a trade that you hold, including the additional swaps that are applied, traders will be able to use this information to better manage their gold trading positions.
FAQs
Gold trading prices are determined by supply and demand, like all exchange traded markets. So, if the gold market becomes saturated by supply and gold demand doesn't rise to match, the price of gold will fall. And if the demand for gold rises, without an increase in supply, the price of gold will rise.
What is the best gold trading strategy? ›
This strategy combines trend following and momentum trading. Traders use technical indicators such as the relative strength index (RSI) and moving averages to identify gold's trending direction and strength. They buy when momentum is strong in the direction of the trend.
What are the fundamentals of gold trading? ›
The more the production of gold, the higher the supply would be, and the lower the prices of gold are likely to be. And on the contrary, if the production of gold is low, the supply would be low, which would ultimately push the prices of gold upward. There you have it - four primary keys to trading in gold.
How much is 1 pip in gold? ›
Gold has a two-decimal quote, meaning 1.0 pip in gold is $0.01, the smallest price increment in which gold can move.
What is the secret gold trading strategy? ›
In this strategy, a trader would look to buy gold if a shorter-term moving average crossed above a longer-term moving average and sell when the shorter-term moving average crosses below the longer-term average.
How to trade gold like a pro? ›
Our principal gold trading tips are therefore:
- Consider whether the markets are in “risk on” or “risk off” mode;
- Look at the likely performance of the US Dollar as well as the gold price;
- Consider a mix of fundamental, sentimental, and technical analysis;
- Watch out for central bank buying or selling;
It is one of the most popular strategies among gold scalpers. It got its name for the 5-minute timeframe, which means you are supposed to perform a trade within the next 5 minutes. However, it is not as simple as some may think, as it calls for the H1 period to perform the major trend analysis.
What time is best to trade gold? ›
In the forex market, gold is traded as XAU/USD and is open for trading 24 hours from Monday to Friday. Traders looking for optimal times to trade should consider the North American trading session (3 pm – 11:00 pm GMT+3) as it records the highest trading volume and volatility.
What is the most profitable way to buy gold? ›
Companies that specialize in mining and refining gold will also profit from a rising gold price. Investing in these types of companies can be an effective way to profit from gold and can carry lower risk than other investment methods. The largest gold mining companies boast extensive global operations.
What is the formula for gold trading? ›
How to Calculate Pips on Gold. To calculate the value of gold pips, multiply the pip value by the number of pips gained or lost in the trade. For example, if you gained 20 pips in the trade, and the pip value of gold is 0.01, the profit would be $2 (20 x 0.01 = 0.20).
Let profits run and cut losses short Stop losses should never be moved away from the market. Be disciplined with yourself, when your stop loss level is touched, get out. If a trade is proving profitable, don't be afraid to track the market.
How many pips is $10? ›
The pip value is $1. If you bought 10,000 euros against the dollar at 1.0801 and sold at 1.0811, you'd make a profit of 10 pips or $10.
What is the formula for calculating gold price? ›
In India, to calculate the price of 1 gram of gold, multiply the current gold rate per gram by the purity percentage of the gold item. For instance, if the current gold rate is ₹4,000 per gram and the gold item is 22-carat (91.6% pure), the price for 1 gram would be ₹4,000 × 0.916 = ₹3,664.
How much is 50 pips worth? ›
How much is 50 pips or 100 pips? A pip usually equals 0.0001 of a Forex pair, so 50 pips equals 0.005, 100 pips—0.01. If one pip is worth $5, 50 pips are worth $250, 100 pips—$500.
Is gold trading good for beginners? ›
Trading gold is one way for beginners to diversify your trading portfolio. Different assets, like stocks, bonds, and commodities, react differently to market events. Beginners can include gold as a different asset in your trading strategy to spread your risk across different asset classes.
Can I trade gold with $100? ›
The amount of money you need to trade gold varies based on the method you choose. In forex, you can start with a relatively small capital, sometimes as low as $100.
How much money do you need to start trading gold? ›
How much money is needed to trade gold? Axi allows traders to deposit as little as $50 to begin trading gold. A $500 investment, on the other hand, allows for more trading options, however, traders should risk only what they can afford to lose.
What should I know before selling gold? ›
Research Prices
Before you decide to sell an item, research the market price for gold and the value of the piece. If it's a vintage or designer item, it may be worth more than just the price of the gold it contains. However, you should remember that the market price is different from the retail price.
