The Best way to Trade Gold - Part I

The investment in Gold has gained positive popularity over time. Gold is known for its stability and good fundamentals that make it easy to trade it. With the surge of online trading, you can now trade Gold with a starting capital of a few hundred dollars. Gold is least affected by inflation during bad economic times and thus a good refuge when it comes to safeguarding your wealth. Before jumping into trading gold, it is important that you learn a few tips and understand the factors that control the movements of gold prices. Gold, compared to paper currency, has more value and thus considered more profitable.

Gold has its own characteristics

Gold is different from forex trading in many ways, but the principle of buying low and selling high is constant to any financial instrument you are trading. Gold is a lot less volatile than most of the currency pairs traded in forex. Therefore it is very hard, sometime impossible to scalp trade gold. Brokers offer very low leverage for gold. It depends on the broker, but in general the leverage on gold is almost the tenth of currency pairs. However, gold has a lot of advantages; with a larger initial capital, there is a good chance that you make more profits. Since gold is more stable than currencies, it will stabilize your trading.

Trading gold online is among the safest and cheapest way to invest in gold. {The first advantage is that you will not have to worry about security or storage space as you will not come into contact with the gold physically.} {Online gold trading has many advantages. You will not worry on where to store it or worry for its security.} You can use the available leverage if you do not have enough capital to start trading. To succeed in spot trading, there is a need to manage your money. Like in every other market, never over-leverage because it can wipe out your money in fraction of seconds.

Portfolio diversification

This is a good example of not risking everything on one endeavor. Because there are different ways of investing in gold, you should spread your investment in all of them. This is just a way to minimize possible risks. Diversification protects you from major losses in one investment. You can consider investing in gold bars and coins for a value of 35% of your capital, the rest can be split between gold futures (20%) and spot gold (45%).

Do not put in all your money at once; instead, you can gradually increase your exposure to the gold market. It will give you the time to watch the trend and understand your trade better. Now, you should be aware that there are a lot of ways to invest in gold. It is essential that you diversify your capital between all of these financial instruments.