Who doesn’t want to trade in gold? Even amateurs jump into the gold market after spending a few months in currency trading. The strong trending nature of the gold price has made it one of the favorite asset for many investors. We all know the benefits of taking trades with the trend. Picking gold as your trading instrument gives you a unique advantage to analyze the key variables of the market. In other words, it allows you to make a significant profit just by riding the trend.
The benefits of trading gold are enormous. But there are certain rules you must follow as a new gold trader. These are –
- Trade with the trend
- Execute order with price action signal
- Avoid trading the news
- Use 1:10 leverage
Trade with the trend
The first rule should be very normal to the retail UK traders. It is the reason for which we will be taking trades in gold. Some of the curious traders often try to trade the reversal so that they can make an insane profit by riding a newly formed trend from the beginning. But such an approach rarely works. You have to study the different phases of the trend and find a way to stick to the trend trading technique.
Experts analyze the daily and weekly time frames to find the trend. Amateurs focus on the hourly time frame. In case you take trades in the hourly time frame, you might end up by taking trades with the retracement and this can result in losing trades.
Execute orders with the price action signal
The elite class CFD traders know how to deal with the price action signal. The price action trading method allows retail traders to make a decent profit. The reason why you should learn to deal with the raw price data is precision. The indicator based trading method requires wide stop loss and the execution is not that precise. In order to stay on the safe side in trading, you should focus on the different forms of Japanese candles.
Focusing on the Japanese candlestick or bar might seem hard but if you know the proper way to read one candle, you will know how the other candle works. But the learning process will get a bit complex when you start focusing on the complicated candlestick pattern. With proper devotion, you can expect to learn all the reliable patterns is less than three months.
Avoid trading the news
Everyone suspects the professional gold traders are earning money by trading the news. But in reality, no one is trading the news. In fact, they are using the news data to analyze the quality of the technical data. Based on the news and technical data, they come to a conclusion about whether they should execute a trade. On the contrary, amateurs, execute order prior to the news just based on the technical data. It’s more like testing your luck. But in the CFD trading industry, no one should ever push their luck.
Try to trade what you see in the chart. Stop believing in luck and stay away from emotional trades. Execute the trade that seems logical.
Use 1:10 leverage
You must not use more than 1:10 leverage because if you do so, you will lose money most of the time. The traders don’t know how to utilize the leverage. In fact, 1:10 leverage is big enough to open a large position in the gold market. To be one the safe side, use less than 1:10 leverage. In each trade, the maximum risk you should take is 2% of the account balance. New traders should risk only 1% of their investment. Though it seems too conservative, it will help you survive in the long run. Lastly, trade with a premium like Saxo so that you don’t have to face any technical problems.