5 Tips for Trading Gold (XAU/USD) - Trading strategies for Beginner

Nov 22, 2021
With the continuous rise in international gold prices, more and more investors have begun to flock towards the gold trading market. However, investors ought to understand that there are certain risks in all investments, and they need to be cautious. Investors must have specific investment knowledge to capitalise on gold trends and remain successful in this market.

Some crucial pointers to understanding and trading gold trends

1. Consider the exchange rate​

When the domestic currency appreciates, people can buy relatively cheap gold products from abroad because, during such times, the gold prices in the home country may not fluctuate too much. Still, this does not mean that the value of gold itself will fall correspondingly. Instead, a decline may result from changes in the exchange rate of the local currency against foreign currencies. Therefore, while investing in gold, you also need to have a certain amount of forex knowledge. Otherwise, you could act in a rash and incur losses.

2. Buy carefully​

Gold is a product suitable for medium to long-term investment, so it is difficult for investors to see substantial changes in the short-term gold trends and prices, disregarding any spikes. When the gold price rises sharply, many investors will actively buy gold, thinking it will bring them quick profits. But in fact, the main advantage associated with gold is long-term risk avoidance, so the rate of return on gold investments is relatively low. Therefore, the proportion of personal investments in gold should not be too high, and investors need to be cautious when trading gold.

3. Don't over-leverage when you lose money​

Investors tend to panic after opening a gold trade if the gold trend suddenly reverses and heads in the opposite direction. Many investors will want to add to their losing position to minimise their losses. Such transactions are pretty dangerous since you risk compounding your losses. If gold prices have risen for a while, they may have topped by the time you are buying. Therefore, If the price of gold does not continue rising and starts falling after you buy, the best course of action is to cut your losses instead of opening new trades.

4. Portfolio investment​

Gold prices often trend in the opposite direction to other investment products, so adding an appropriate portion of gold to your investment portfolio can diversify your risk exposure to a great extent. Gold can effectively protect you in case of a sharp decline in the value of your other assets while remaining stable when the value of your assets rises.

Buy gold in batches. From a strategic point of view, investors should follow the rising trend of gold by placing orders in one direction and adding to their position on pullbacks as gold prices keep rising. Therefore, it is necessary to buy in batches so that you can get better overall prices and wait until the price trend rises again and pulls back, providing another buying opportunity.

5. Short-term trading needs to be cautious​

When short-term traders are trading gold, they usually want to get in quickly, make a profit and get out just as fast. However, the result of rushed trading is usually the opposite, as traders are more likely to incur losses than make a profit. Investing in gold requires a specific set of analytical skills acquired over time. Gold price trends change relatively slowly, with minor fluctuations. So if you want to make a profit, you need to wait patiently for gold prices to appreciate.

The trend in international gold prices is closely related to the US dollar. Therefore, the factors affecting the US dollar’s price trends also help analyze the gold price trends. In the Internet era, online gold trading is very convenient and safe, but investors must choose formal channels for gold investment. Learn more trading strategies and get to know more about gold trading.

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