Gold is popularly known as a safe haven asset because, during economic uncertainty, and recession, the price of gold remains the same or increases while the price of other assets decreases. So gold trading is the safest. However, to assure positive return, you need a Gold trading strategy.
What are gold trading strategies?
Gold trading strategies refer to trading plans prepared on the basis of technical analysis, fundamental analysis, and sentimental analysis of the market. These strategies help traders understand when to buy or sell gold to make maximum profit.
A gold trading strategy is prepared by analysing factors such as economic calender, news, trends, indicators, demand and supply, etc., which may cause price fluctuation.
An effective trading strategy consists of when to buy or sell gold, how much your investment capital and risk amount will be, your entry and exit points, and other important details of the trade.
A quick glance
Gold trading strategies refer to trading plans prepared based on technical, fundamental and sentimental analysis of the market.
Strategies for trading in gold
- Day trading gold strategy: Best for short-term trading
- Price Action Strategy: Plan based on price fluctuation
- Gold scalping strategy: Best for small profit from multiple trades
- Position Strategy: Best for long-term trades
- Trend Strategy: Must keep an eye on Market trends
- Copy Trading: Best to get gold trading tips
- News trading: The best way to take advantage of current events
Consider the following factors before selecting a trading strategy.
- Gold trading way
- Experience
- Money management
- Interest and skills
Strategies for trading in gold
If you are wondering how to trade gold in forex, here is the answer. There are many strategies by which one can trade in gold. However, before selecting the best way to trade gold, it is important to have an idea about these strategies, their features and how to use them.
Day trading gold strategy: Best for short-term trading
The meaning of day trading strategy is quite clear from its name. It is a short-term strategy to execute a trade on a particular day.
Day trading strategy is prepared by analysing fundamental factors such as news events, economic reports and central bank policies. The main aim of day traders is to take advantage of the short price movements.
Price Action Strategy: Plan based on price fluctuation
With the name, it is clear that the strategy is formulated based on the market’s price movements. Based on historical price patterns and trends, one can predict the future of the asset.
Suppose a piece of news is circulated that the value of the USD will decrease due to political turmoil. Gold has an inverse relation with USD. In this case, the price of gold will rise against the USD. A trader will buy the XAD/USD pair.
In the above example, the trader made decisions based on historical trends. Many techniques are there for interpreting the price movement, which includes candlestick charts, price level bars, trend charts, etc. These work as signals for traders to buy or sell gold accordingly.
Gold scalping strategy: Best for small profit from multiple trades
The most popular XAU/USD trading strategy is scalping. Gold scalping is the method of entering and exiting the market in a short time. A scalper indulged in multiple trades in a day to earn profit.
Due to high asset volatility, traders can generate significant profits quickly from gold scalping. The method uses technical indicators to predict the short movements of the market, such as oscillators moving averages, trendlines, etc.
Under this gold trading strategy, traders buy or sell orders to enter the market at a specific price and stop-loss orders to manage risk. It is essential to manage risk and limit losses.
Position Strategy: Best for long-term trades
Position trading is a profitable gold trading strategy based on fundamental analysis tools. It includes monetary policy, political factors, and economic indicators which directly or indirectly affect gold trading.
It is a common gold strategy for long-term trading. It can be for a period of some months to years. The main aim is to benefit from the big price change and earn a lot of money. A trader usually enters a buy position under this strategy.
Generally, traders are involved in long-term trade; the difference between the time of buying and selling gold is in years in some cases.
In order to get maximum profit with fundamental analysis, it is essential to keep an eye on the market 24/7.
Trend Strategy: Must keep an eye on Market trends
Trend strategy is a popular gold forex trading strategy. It is prepared by analysing and interpreting the market movements and factors. There are mainly two types of trend strategy, following or countering. Some traders follow the market trend, and some do the opposite.
Counter-trend strategy is quite risky. Experienced and advanced traders use it. Under this, the market trends are analysed using sentimental, technical, and fundamental analysis.
It is important to identify the type of trend before formulating the strategy. There are short, medium and long-term trends. A novice trader should use long and medium terms trends as they are more stable and predictable.
Copy Trading: Best to get gold trading tips
Copy trading is one of the best strategies for gold trading for beginners. It is the method of copying the trade ideas of experts and advanced traders. Traders with a lack of market knowledge or who did not have enough time to watch the market can use this strategy.
The main aim of copy trading is to earn money from the trade ideas of experienced and successful traders. However, it also involves a high amount of risk. If experienced traders make money, you will make money; if they lose, you will also lose money.
Therefore it is important to manage the risk levels in copy trading such as maximum exposure and drawdown points of trading. A trader can copy trade ideas with various apps and platforms.
News trading: The best way to take advantage of current events
Like any other asset, the price of gold is also influenced by news events. A news trading strategy is formulated based on current events such as economic reports, central bank policy, financial, geopolitical and other events.
You can get a gold trading view from news sources such as newspapers, websites, social media platforms, and news channels. Suppose you have received the news that the workers of Gold mines in a particular country are protesting. Due to this, the gold-digging process is disrupted.
In the above case, the price of gold will rise in future. As a result, a trader bought the gold, and he will sell it when its price rises. So he will make money from the price difference.
How to select a best gold trading strategy
We have learned about Gold forex trading strategies. Now the question is how to choose a trading strategy to start trading in gold. Your strategy plays a significant role in the overall success of your trade. So it is important to select the trading strategy effectively to increase the chances of positive outcomes.
Gold trading way: There are many ways to trade in gold, such as Gold futures, options, spots, ETFs, CFDs, bullions and others. The type of trading strategy will depend on the trading type.
It is important to select the trading strategy according to your trading way otherwise it will affect the result of your trade.
Experience: The selection of a strategy also depends on traders’ market knowledge. Some strategies are easy to understand and implement; that’s why they are best for beginners.
However, some trading plans are complex, and their execution requires market knowledge and experience. So they are best for advanced traders. It is advisable for a novice trader to go for simple trading strategies such as copy trading, day trading, and news trading.
Money management: Each trader has their own goal. Some traders want small profits with little risk. Meanwhile, some traders want to earn a big amount of money. These types are comfortable with a high amount of risk.
So before selecting a trading strategy, it is necessary to determine the money and risk management factors. Go for day trading, scalping to earn a small profit with little risk and to earn a large amount, position trading and price trading are best.
Interest and skills: Different people have different skills. Similarly, different strategies require different skills. Suppose you love reading the news, so the new trading will be your best gold trading strategy, or suppose your analytical skills are good, then go for price or position trading.
So select the strategy according to your interest and skills. In this way, trading becomes interesting for you, and the efficiency of your plan will increase.
Bottom line
Gold never gets old. Gold trading is the best way to invest your money. However, you need an effective Gold trading strategy to increase the chances of a positive outcome.
Choosing your trading plan after detailed research and analysis of the market is a must to reduce the chance of loss. However, a trader needs to understand that even after applying the best trading strategy there are chances of failure.
Earning and losing money is part of the game. Risk is involved in the trading of all financial assets. In gold trading, the risk is comparatively less. It is impossible to eliminate the risk, but you can surely reduce it by selecting the best trading strategy.
