Among all the currency pairs for which Forex trading is possible, the use of a gold – US dollar pair (XAU / USD) is quite common for a number of reasons:
1. Gold retains a fairly large liquidity in any economic situation. 2. Gold always grows in value as the global economy falls or the economic situation in the leading countries of the world deteriorates. 3. The volatility of the pair remains quite high, which allows you to get good income even when trading for short periods. 4. The price of gold correlates with the price of world currencies and oil, which makes fluctuations in the value of this precious metal more predictable compared to the leading currency pairs and, especially, cross-rates.
Forex Gold Trading Strategies
Forex trading strategies can be divided into long-term and short-term. Long-term trading brings lower returns and can be considered a peculiar way of investing funds with minimal risks.
The reason for this is that the value of gold is not subject to sharp fluctuations, and in the long run the price of this metal, used by almost all investors to save their funds during the economic crisis, is constantly increasing.
The short-term gold trading strategy for Forex has such features:
– based on the high volatility of the pair even during the day – the pair is most efficiently traded within the time interval 11: 30-15: 00, since it is at this time that the gold price is fixed on the London Stock Exchange – the potential yield may be lower than the calculated for high spreads from forex brokers specifically for gold trading.
A potentially short-term Forex trading strategy is more profitable, but also more risky. The level of risk also depends on the leverage used, since the high volatility of the pair and the large margin on the open trade can lead to the fact that an open order will be closed in a footstep even with a properly made tactical decision. Therefore, the risks of trading gold should be evaluated especially carefully when trading through Forex, using high lots or a small amount of start-up capital and applying a short-term trading strategy.
Indicators for Forex Gold Trading
Considering the fact that gold trading is carried out according to the same principles as for standard trading instruments (pairs EUR / USD, USD / JPN, EUR / JPN, USD / GBP) and cross-rates, fundamental and technical analysis, all types of indicators and oscillators.
With a long-term trading strategy, the main indicators for trading gold on Forex may be the minimum and maximum values of the course over the past few months. Thus, the achievement of the minimum values of the pair may serve as a reason for opening a transaction, if there are data in favor of the further growth of the precious metal. In the case of short-term trading in this case, a deal for the correction of the main trend may be opened, although it is also more risky.
For short-term gold trading on Forex, trend lines and support and resistance levels based on Fibonnachi lines, Gann levels or other popular technical analysis tools can serve as the main indicators.
In general, the peculiarities of gold trading on Forex imply the need to develop their own trading system, which would take into account the data of fundamental analysis and several indicators for correct decision making, especially when using short-term periods for trading.