How to Trade Gold For Dummies: What You Should Know First

When you start trading, one of the most popular currency pairs that you’ll come across is the XAUUSD or gold. In fact, every trader that you will come across will probably tell you that Gold is their favorite commodity pair to trade.

Why is that? Well, we’re going to explain what makes Gold such a popular trading instrument and will give you a few things to consider when you do trade it.

3 Reasons Why Traders Love their Gold?

• Massive Liquidity

First of all, the XAUUSD pair has massive liquidity. This means that because of its high convertibility to cash, there’s always going to be intense movement. Rarely will you really see a choppy XAUUSD chart because it’s always moving. What’s more is that gold tends to move really fast– especially in times of economic unrest.

The reason for this is because Gold is a safe haven commodity. When there is economic downturns, investors usually put their money in Gold since Gold happens to be one of the safest instruments.

• High Earning Potential

The massive liquidity provides it with high earning potential. Gold is very volatile in general. If you look at the graph, you’d actually see a lot of swings even though it is in a massive trend. If you can enter at the right time, you can ride a lot of amazing movements.

• Easy-To-Spot Opportunities

When trading Gold, it’s not that hard to spot for opportunities. Gold is usually in a long term uptrend or downtrend, unlike other currencies that may be stuck in range movements for a long time.

If you know how to spot the important levels, it’s not that hard to ride on great earning opportunities since it’s already in front of you.

Let me show you an example of a recent XAUUSD chart in its uptrend:

As you can see, trends are pretty clear for Gold even though there are a lot of swings.

Beginner’s Tips for Trading Gold

• Trade Gold in Economic Downtimes

When you want to trade Gold, you must first understand the global economic situation. If the world is in a global recession, then investors will most likely put their money in safe haven currencies such as Gold, USD, CHF, and JPY. More often than not, Gold is their preferred choice.

If the global economy is not going well, you can long XAUUSD. Inversely, a risk-on or good global economy where investors are not afraid to risk a little will warrant shorting opportunities for the XAUUSD.

• Trade Gold in the Opposite Direction of the USD

As individual commodities, Gold and the USD are typically inversely related. If the USD isn’t doing well, then Gold is usually thriving. If Gold is doing well, then the USD is probably tanking.

As traders, you must always be on the lookout for news that comes from the US. News releases, in particular have a high impact on Gold because high impact news usually changes the course of the USD’s movement. So if the medium to long term trend of the USD is bearish, it’s great to look for long opportunities with Gold and vice versa.

• Move With the Trend

As we mentioned above, the XAUUSD pair usually moves in a trend. That’s why trend traders usually thrive with this pair. With the help of price action trading or other strategies that can exploit trends, it’s possible to ride massive waves that can give you good profits.

• Know the Key Levels to Plot

When trading Gold (or probably any other currency pair for that matter), the key levels are very important to take note of. These key levels (we call these support and resistance levels) are the areas wherein price will bounce. And when they bounce, they bounce hard. If you master plotting these key levels in the chart, you can master trading gold.

The Bottomline

The bottomline when trading Gold is that you need to be equipped with two things– a good trading strategy that can exploit trends and price action, and time to monitor the US news.

If you have these in your arsenal, then you’re ready to trade Gold.

Here at Learn to Trade, our expert coaches all love trading Gold. They’ll be more than happy to teach you how to monitor the precious metal and help you look for both trends and key levels of movement in your chart.

To learn how you can trade Gold, register for a FREE seminar below and we’ll show you how you can start!