If you are looking into gold trading as a form of revenue or purely for investment reasons there are a variety of things you need to consider beforehand. First and foremost, you will need to determine what type of gold you want to trade, whether bullion or equity. Each one of these can then be broken down into either bars or coins and direct stock or mutual fund investment.
The next issue you need to focus on is the type of trading you are interested in, namely day trading, swing or position trading. In Day Trading, you will be buying and selling your gold the same day without holding on to if for more than 24 hours to avoid overnight interest costs.
Swing trading is a term that applies to those positions that are held for the mediium term, with mediium term here possibly meaning even years.
If you have decided to trade gold bullion then you need to make sure to use a gold certificated supplier and make sure you are buying approved bullion market gold bars. Gold trading and prices can swing from the excitement of watching paint dry to a volatility that can leave you breathless, therefore it is not advisable to start trading if you are a beginner.
When gold trading it is important to remember that gold is strongly influenced by fundamentals and a purely technical approach may not be the best strategy to assume. At the very least, avoid trading when news announcements are being made concerning indicators and forecasts as trading volatility tends to spike a few moments earlier than and during the announcement.
The problem is that it doesn’t always go in the direction you presume and even if you believe you can earn a lot by trading the news remember that you can just as easily lose a lot.
If you have opted to go into gold trading via an investment in a mutual fund or a gold mining company, then you will have to perform an in-depth analysis of the company you intend to invest in.
You will want to study their balance sheets, management team as well as the geological surveys so you can get a rough idea of how much ore the company still has access to. You should also look at the trading charts for the company’s stocks to see the evolution of the price. This will be a priceless tool to help you find out if the price is right for you to invest.
If you find that the shares are near a historical resistance level then you may consider holding off on your investment until the price begins to retrace. If there are no major fundamentals affecting the share prices then you can consider the retracement a negligible correction and buy when the price reverses again.
Fibonacci levels are regarded by many chartists are sort of self fulfilling prophecies: they are proven right simply because people start acting as if they were right, once those levels are being approached.
Gold trading is essentially like trading any other commodity except that price reacts inversely proportional to market sentiment, IOW, the harsher the economic climate the more gold trading takes place and the higher the price.
