Gold is the universal asset. Coveted for its beauty and value, it is the ultimate investment. The easiest and most accessible way to invest in the great world of gold is via gold stocks. The delivery or settlement day is usually three months ahead and traders use this delay to speculate the rise and fall in Gold prices. You can manage this risk by trading before the settlement day. Using this method you deal only in gains on losses.
With gold futures trading you essentially get more for your money. This is done through gearing or leverage. Professional traders invent their own contracts but fortunately there are standardised contracts which are traded through a financial futures exchange. Standardised contracts have numerous advantages to you as a speculator including giving you the option to sell when you choose to whomever you chose. They also provide a central clearer, these clearers guarantee against default of both parties buyer and seller and also look after the margin calculations and collect and hold the margin for buyer and seller.
Gold options are contracts where the actual asset behind the trade is a gold futures contract see above. The gold option gives the purchaser the right, but not the obligation to buy the futures contract. Options are divided into two types or classes, Calls and Puts.
Calls are purchased when a trader is confident in a rising price in the gold markets and Puts are purchased when a fall is expected. These are not the only methods of trading. You can also sell or use a combination of strategies known as a spread. Trading gold options is often considered a safer bet than gold futures as the gold option buyer often has a lower premium than the margin required with gold futures.
Any losses are limited to the purchase price. You can trade gold options alone or in a combination with gold futures options implementing a broad risk-reducing strategy which can often guarantee excellent returns. These are minimum purchase requirements and non-negotiable. Options and futures trading prices can be found at this link: It also outlines how you can minimise your losses. Pay attention to global events.
Current affairs often help predict where the price of gold will go. Historically, gold has been rising since so staying informed will help you time your trades to capitalise on steep uphill price movements.
Begin by trading with a demo account. When you do switch to real money, deal in small amounts to begin with. Set yourself loss limits and stick to them. You will occasionally need to make quick decisions. Try not to be too hasty and ensure any decision you make is well informed. They're the basis of technical analysis. Hedging is sort of like an insurance to help you insure yourself against loses.
This is really important to maximise profits. This is a system based on price action that relies on reversal patterns. The gold market is constantly evolving and adapting to the modern world.
Keep yourself on top of the trends. There is plenty of information to be found on the internet even on sites such as Wikipedia. Learning how to trade gold futures and options is an easily accessible entrance into the exchange market. It gives investors an opportunity to make money whether the market for gold is going up or down and offers a position in gold for substantially less capital than expected. Buying gold may be a bit daunting, but there are several investor guides that you can get which would help you decide what to do.
Your email address will not be published. Tom is a former accountant turned entrepreneur. He is not a financial adviser but does tend to give a lot of financial advice to his friends and colleagues.
He currently runs a small online venture and blogs about his research and experiences. Future contracts are traded the world over. The exchange will decide the settlement date, amount and delivery conditions. Leave a Reply Cancel reply Your email address will not be published.
About Author Tom Smallwood Tom is a former accountant turned entrepreneur.More...