In the past, only skilled traders used to trade the gold market. But due to the advancement of technology, retail traders are slowly learning to trade precious metal. Taking the trades in precious metal might be similar to currency trading business but there few things which make this industry completely different. So, if you expect to make money by using currency trading, you might be disappointed.
The price of gold is usually measured in the U.S dollar. So, a slight change in the value of the U.S dollar significantly impacts the gold market. The professional traders know this fact very well and thus they take cautious steps. Now let’s see some amazing steps by which we can trade the gold market like the pro trader.
Analyze the U.S dollar index
We have already said that the price of gold is measured in the U.S dollar. So, to trade the gold market, we need to analyze the U.S dollar index on regular basis. Without analyzing the U.S dollar index, it will be tough to make the right decision at trading. You might be thinking that analyzing the U.S dollar index is a very tough task. But it is very easy. Spend some time in the demo account and study the price movement of the U.S dollar index. Soon you will be able to find the support and resistance level.
Trending nature of the gold market
Professional gold traders love to trade with the trend. And they always use premium brokers like Saxo capital markets. They know without having access to the robust trading platform, it was impossible to analyze the price movement in the gold market. Once you have ensured a professional platform, try to find the existing trend in the gold market. Use the highs and lows to draw the trend line. Remember, a valid trend line should have three connecting points. Unless you find the real trend in the gold market, it will be a big challenge to execute the trade. Though you will get the option to trade the reversal it is better to avoid the reversal trading signal in the gold market.
Use the moving average
The moving average can become an excellent tool for trading precious metals. Use the 100 periods moving average to determine the trend of the market. If the slope of the 100 period moving average forms an ascending pattern, you should be looking for the long trade signal. On the contrary, look for the short trade setup when the slope of the moving average is negative. Some traders often consider the 100 periods moving average as the dynamic support and resistance. For instance, if the price trades above the 100 SMA, you should see a decent bullish bounce as soon as the price test the SMA.
Similarly, when the price is trading below 100, you should see a strong drop in the price once the price tests the 100 SMA. By learning the use of the moving average, you might get interested in scalping the gold market. But remember, gold trading should be considered a long-term investment. If you want to make a quick profit, trade the currency pairs.
Analyzer the news factor
Without analyzing the news data, you can never become good at the gold trading business. Most people think they know everything about the market. Thus they start taking the trades based on the technical data. But after trading the market for a few months, they realize the fact that gold trading is not about the technical analysis process. To succeed in the gold trading business, you must learn technical and fundamental analysis.
Once you become good at technical and fundamental analysis, you should become more confident with the overall gold trading process. So, start learning the important factors mentioned in this article and trade the gold market with strong confidence.