6 Things you need to Know Before Trading Gold

There are numerous financial instruments available to trade with including currency pairs, CFDs and gold. Since gold usually maintains its value even in the most turbulent economic circumstances, many traders resort to gold as it is considered a ‘safe haven’ asset.

Online gold trading has become incredibly popular in recent years as it is considered one of the easiest and cheapest ways to make a profit. Read on for 6 things you need to know before trading gold…

  1. Don’t Buy Too Much

Although gold is typically considered a safe haven asset, its price can still be volatile, so only invest up to 5% of your portfolio in gold. Think about diversifying your portfolio so that if one investment fails to perform well, there are always others to fall back on.

  1. Keep Up-To-Date with Forex News

Watch the latest forex news to remain afloat of the most recent market updates. Take a number of factors into account including inflation, GDP and interest rates to gain a better understanding of price movements. This will help you to refine your trades and make more strategic trading decisions.

  1. Perform Technical Analysis
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Motivational Quotes from Top Traders

Here are 15 motivational quotes that will help keep you focused and on the path to successful trading…

  1. “Money is made by sitting, not trading.”Jesse Livermore
  2. “Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.”Larry Hite
  3. “Letting losses run is the most serious mistake made by most investors.”William O’Neil
  4. “[Michael Marcus – another top trader] taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgement, being wrong, making your next best judgement, being wrong, making your third best judgement, and then doubling your money.”Bruce Kovner
  5. “That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’”Paul Tudor Jones
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The Elliott Wave Theory for Forex Markets

When you evaluate the Forex market for the swing trade opportunities, the focus of consideration is to predict the continuations and directional changes for certain given pair of currency, and for this purpose; most of the times people rely on technical analysis. In such an analysis, for instance, the fundamental analysis, there are leading and lagging indicators.

One of the most reliable analysis tools in this regards, that is used to predict the Forex market swings is termed as Elliot Wave analysis. It can be used to classify the trends as well as countertrends, continuation and exhaustion trends and last but not the least, to evaluate the potential price targets of any trend. Elliot Wave analysis can be used to predict both, short as well as long term swing trade set up for the currency pairs.

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Leverage and its Risks

Leverage can be defined as the amount of a trading position you can control with a given amount of margin, i.e. money placed on deposit as collateral. Also, the leverage ratio is the ratio of that amount of leverage to the amount of margin.

In practice, a leverage ratio of 50:1 would mean that you could control $50,000 worth of a position with just $1,000 on deposit as margin.

While professional forex traders generally trade using the credit lines that banks and their counterparties extend to each other, retail forex traders have to master this concept of leverage since they are usually required to trade on margin rather than credit.

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How to Construct a Mechanical Forex Trading System

As forex software becomes more complex and automation becomes more common, many traders now rely on mechanical forex trading systems. These software systems execute trades when certain market conditions are met, with or without the confirmation of the operator. So how do you set up one of these systems?

For starters, you will need software and a broker that supports automated trading orders. Metatrader 4 has the programming language built in and a large number of brokers now use this system. If you are willing to learn the Metatrader programming language, you can set up this part of the system very easily.

The next step is to identify your strategy. Say that you plan to use trend trading based on technical indicators. You would probably use the moving average cross-over system. This method relies on the long-term and short-term moving averages. When the price of the short term average crosses over the long-term, it usually indicates an upward trend.

However, you also need a further step-confirming the trend. Here, you might use technical indicators such as ADX (Average Directional Index) or Moving Average Convergence/Divergence (MACD). These indicators confirm the likelihood that a trend is legitimate and significant. So your order might look like this:

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