Gold Trading
Gold has been a very interesting product of late
, especially for anyone who invested in it. However, it is not all one way traffic. Despite its seemingly never ending upward trend gold can be rather volatile on a day-to-day basis.
Only a few weeks ago all the equity markets were looking nervous and many traders sought the so-called safety of gold. That spike left sellers of gold looking over their shoulders.
The trend higher is still very much in place and, with everyone wondering which currency should be the weakest, rather than the strongest, gold remains a haven for frightened money.
A clear problem for anyone speculating on gold at these very high prices is, that whilst gold continues to grind higher, the buying remains investor-based rather than consumer-based. If that is the case then we will see continued volatility in this metals market.
So how can you take advantage and trade the gold market? Personally, I use a
spread betting account; an account which lets you open and close bets quickly. It also allows you to speculate on the markets to go up if I think that is what is going to happen. However, it also lets you speculate on them to go down.
If I want to bet on gold to continue to go up then, at the moment, the FinancialSpreads.com gold spread betting market is priced at $1,090.5 - $1,091.0.
This means you can spread bet on gold to move above $1,091.0 or below $1,090.5.
When spread trading, you bet on every unit the market rises or falls; in the case of the gold market a unit is $0.1 of the commodity's price movement. For this example, lets say you choose to bet 2 for every $0.1 gold moves up or down.
So if you bet that gold would go higher than $1,091.0 and the commodity rose then the
gold spread could move to $1,095.4 - $1,095.9. Assuming this was the case, you could close your spread bet at $1,095.4.
Your Profits (or Losses) = (closing level of the market - opening level of the market) x stake per $0.1
Your Profits (or Losses) = ($1,095.4 - $1,091.0) x 2 per $0.1 stake
Your Profits (or Losses) = $4.4 x 2 per $0.1
Your Profits (or Losses) = 88 profit
Markets can also fall, if the price of gold were to drop to, for example, $1,087.2 - $1,087.7, you might decide to close your trade to restrict your losses. Therefore, you would sell back at $1,087.2.
Therefore, with the same 2 per $0.1 stake:
Your Profits (or Losses) = (closing level of the market - opening level of the market) x stake per $0.1
Your Profits (or Losses) = ($1,087.2 - $1,091.0) x 2 per $0.1 stake
Your Profits (or Losses) = -$3.8 x 2 per $0.1
Your Profits (or Losses) = -76 loss
Spread bets carry a high level of risk to your capital, you should only speculate with funds you can afford to lose. You can lose more than your initial investment. Like the adverts say, before trading, please ensure that spread betting matches your investment requirements. Familiarise yourself with the risks involved. Seek independent advice where necessary.
by: Thomas Bainbridge
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