Gold CFD Trading: Tips for Beginners
Global financial markets have evolved enormously. From technological advances to software innovation, the world of investment and trade now consists of an extensive list of currencies and financial instruments. One of them is the contract for difference (CFD) on gold.
In a nutshell, a CFD on gold is nothing more than a contract between two parties speculating on the future price of the precious metal.
How to trade CFDs on gold
Here is the process that you can take when trading CFDs on gold.
(1) Open a trading account
Just like in any other trading activity, the first essential step you’ll need to take is to open a trading account. To trade CFDs on gold, there are many options to choose from online. When creating a trading account, many of them require the same things, such as:
- Phone number
Once this is done, you’ll have access to a whole range of financial products, resources, and customer service.
(2) Select the underlying gold product you want to trade
Of course, you can buy a CFD on gold that focuses exclusively on the precious metal. But there are also many other underlying assets related to gold that you can take advantage of, whether it’s a gold mining stock or a gold-focused exchange-traded fund (ETF). Perhaps the best strategy is to focus on the movement of the gold price and then, with some practice, diversify your strategies and embark on unique methods to trade CFDs on gold.
(3) Identify trading opportunities using your strategy
Do you have a strategy for trading CFDs on gold? If not, you’ll need to develop one. After completing this essential task, you can then proceed to identify trading opportunities using your specific strategy. Of course, there are many different tactics to choose from, such as news trading, trend trading, price action trading, and day trading or swing trading. The more you trade, the more familiar you’ll become with gold movements.
(4) Open your first position
Once you’ve become accustomed to trading CFDs on gold after making some trades with the demo account, you can proceed to open your first position. In any case, this is a monumental occasion that you should be proud of!
(5) Monitor your trades
Like any other CFD trading protocol, you’ll need to monitor your trade and how it’s performing session by session. One of the best tools you can use is fundamental analysis or technical analysis. The first tool is generally an assessment of the discrepancy between the market price and intrinsic value using specific techniques. The second involves a trading regime that evaluates your investments and seeks trading opportunities by tracking price trends and patterns on charts.
(6) Close your position
Finally, once you’ve reached the price target – which you should always stick to! – it’s time to close the position. This way, you’ll ensure that you’ve achieved your goal, potentially made a profit, and learned a valuable lesson.
3 tips for beginners trading Gold CFD
(1) Knowing when to pick your positions
The first step is knowing exactly when to pick your positions. While it’s a challenge to time the market, you should have a specific price in mind. You should also have a general trading schedule that you want to stick to for gold CFDs. If you’re trading gold CFDs during the day, you might choose morning hours for trading activity, as this offers the most price activity.
If you’re a swing trader—identifying uptrends or downtrends—then some time between Monday and Friday is best (the market is closed on the weekend!).
(2) Practice with a demo account
As mentioned earlier, it’s also a good idea to start practicing trading gold CFDs with a demo account. This will allow you to practice with fake money instead of using your real money for something you’ve never done before. With a demo account, you can learn the basics, come up with new strategies, and experiment with tips.
(3) Pay attention to the news
Lastly, regardless of the market you’re trading in, it’s crucial to pay attention to the news. This is especially important for metal commodities, which are sensitive to a variety of factors, such as the U.S. Dollar Index (DXY), U.S. Treasury bond yields, monetary policy, inflation reports, and the stock market in general. You don’t need to spend all day watching CNBC or Bloomberg or browsing the Investing website, but understanding what’s happening in the world and the causes of these events can keep you informed about the current market situation.
Do your homework and research!
In financial markets, you should never go in blind. You need a fundamental understanding of how everything works. This is only achieved through thorough research before entering a gold CFD trade. In fact, there are many ways to trade the precious metal with all kinds of investment instruments. The most important thing is to keep your emotions in check and be patient when trading. If you’ve done your research and used the best strategy, don’t be alarmed if conditions don’t immediately go in your favor.
Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected].