Trading gold on the Forex market: how to make a profit?

Post updated: Jul 19, 2020

Forex is an international foreign exchange market with daily turnover exceeding $3 trillion. Transactions on the market are speculative in nature, exceptions are very rare. Any transaction is carried out through an intermediary, who is a broker or dealer. Trading of monetary units is carried out in pairs. The over-the-counter market operates on the basis of continuous currency exchange between banks and brokers. Recently, the Forex market, on which gold is also traded, has attracted increasing attention from those wishing to make money on their savings. What are the features of gold trading on this market?

Gold on Forex: trading on MT4

For broker NPBFX, gold confidently ranks first in the ranking of trading volumes among precious metals on Forex. Professionals note that XAU/USD has the ideal set of characteristics for profitable trading, combining liquidity, predictability and volatility. The most popular MetaTrader 4 platform and favorable NPBFX conditions make gold trading even more comfortable.

Advantages of trading gold with NPBFX broker:

• Transactions are concluded with instant speed and automatically.
• Margin trading with leverage up to 1:1000.
• Low spreads.
• Working according to the STP/NDD model guarantees withdrawal to the interbank market.
• The transaction execution method is Instant Execution, this allows you to set the maximum deviation from the requested price.
• No requotes or rejections.
• There are no restrictions on trading methods and strategies; the use of advisors and robots is acceptable.
• Gold is an easily predictable asset, which means that trading the precious metal is suitable for both beginners and professionals. NPBFX offers a variety of training options.

The Historical Appeal of Gold

In addition to the obvious technical prospects that the opportunity to trade gold brings, there is another important psychological aspect. The fact is that this precious metal has been an object of adoration since ancient times. The word gold gives rise in people's minds to a chain of associations associated with success and luxury. Over the course of many centuries of human history, gold was mined from the depths of the earth, it was constantly bought, sold and exchanged, it became the standard of dreams due to the combination of unique qualities: beauty, special structural parameters and, of course, rare deposits where it can be mined.

Before trading gold, you need to understand that gold was used by leading countries as a storehouse of their wealth; it was used in world trade as a universal resource for mutually beneficial settlements. Individual individuals buy gold to ensure the safety of their wealth, since the exchange rate of traditional paper money is not stable and can present a lot of unpleasant surprises. Well, of course, now there are many people who want to know how to trade gold by speculating on Forex.

In addition, in the modern world, the demand for gold is becoming even higher, since it is of great value for industrial production, because gold is an excellent conductor of electricity, does not corrode and does not react with other chemical elements, which makes it one of the most durable and accessible metals.

What are the disadvantages of gold trading?

As with other instruments, there are also a number of disadvantages to trading gold. However, all of them can be easily mitigated by choosing the right broker and trading conditions. Among the main disadvantages are the following:

• Sensitivity to world events. To trade gold correctly, it is important to be aware of almost all significant events in the world and devote a lot of time to it. It is especially worth paying attention to the news background from the United States, given that gold is traded in pairs with the USD.

• Energy dependence. The price of gold can be significantly affected by the cost of oil and gas. This fact is important to consider when trading this precious metal.

Content

1. General conditions for trading gold
2. Gold trading strategy based on news
3. Fundamental Gold Trading
4. Intraday gold trading: EMA+MACD+MFI strategy
5. Gold Trading Strategies DrakeDelayStochastic
6. Some features of gold trading
7. Instead of a conclusion

Today, this valuable metal, the most “emotional” and reliable financial instrument, is traded on Forex as a regular spot asset. In addition to direct gold trading, its active dynamics are used as a leading indicator for ordinary assets.

Analytical portal for making the right trading decisions on gold

Broker NPBFX has developed a special Analytical Portal, which contains all the information necessary for profitable trading. On the portal, the trader is guaranteed regular analytics from gold professionals, indicators, trader tools, video reviews, and a variety of educational materials, including an electronic textbook.

In addition, the portal provides access to trading signals that are updated once a minute. Such signals can tell you what to do at a given time with each asset - sell, buy, or still need to wait. Signals are generated based on the ten most popular indicators, which makes them as accurate as possible. Trading signals, together with the economic calendar and detailed analytics, will make trading for “gold” traders even more profitable and profitable.

The analytical portal also contains a detailed description of more than sixty trading strategies that are suitable for both gold and other trading assets. Let's take a closer look at some of the “golden” strategies.

You can get free access to the Analytical Portal from NPBFX after registering your broker’s Personal Account.

Jewelry gold market

Trade in gold jewelry, accessories and souvenirs has always been considered a profitable business. Currently, the jewelry industry using this precious metal accounts for about 58% of the total consumption of mined and processed gold. Particular activity is observed in the acceptance of scrap gold, which can bring up to 500% profit to professional jewelers.

Gold trading strategies for MT4

• News trading. As already indicated, news has a really strong impact on the movement of gold quotes. That is why news trading is the easiest and at the same time effective way to make money on precious metals on Forex. Any events that worsen the overall global economic background can significantly push the price of XAU/USD up.

• The correlation strategy is one of the simplest, since you do not need to have deep knowledge of the market and knowledge of various analyses, observation is enough. The essence of the strategy is to detect patterns in price movements for certain trading instruments. In order to find out which currency gold has what correlation, you can use a special tool in the NPBFX Analytical Portal - the correlation coefficient calculator.

• Goldmine strategy for XAU/USD. To use the strategy, you need a chart with a D1 time frame, on which the Bollinger Bands indicator with a period of 20 and Stochastic with the following parameters are installed: K Period 5, D Period 3, Slowing 3. Take profit is set at the level of the central Bollinger line, at which it is located at opening a position.

1. For a sell transaction, the following conditions must be met: the price reaches the upper Bollinger line, a bearish candlestick is clearly visible on the chart. At the same time, the Stochastic lines are directed downward and are located in the overbought zone.
2. For a buy transaction, the opposite is true: the price is in the area of ​​the lower line, and a “bullish” candle is clearly visible on the chart, while the Stochastic is in the oversold zone, its lines are directed upward.

In general, there are no restrictions on the choice of assistant indicators for trading gold. The only important point is that the indicators should not lag. Therefore, gold traders most often use modified versions of Stochastic and MACD, and Fibonacci levels are also often used to correctly set stop loss and take profit.

How did the new policy of the Central Bank affect

Even in the midst of summer, it became clear that for the first time in the history of modern Russia, revenues from gold exports exceeded revenues from gas exports, reaching $3.58 billion in April-May (in the second quarter, pipeline gas exports brought Russia only $3.5 billion in revenue). This was partly caused by the Central Bank’s refusal for an indefinite period to purchase gold on the domestic market, which Elvira Nabiullina’s department has been doing for the last 5 years, accumulating gold reserves worth $120 billion. Banks, to which mining companies are obliged to sell gold under loan agreements for the possibility of financing, had no choice but to send gold abroad. There is simply no one in Russia to buy it in such quantities. In addition to banks, in April 2021, gold producers themselves received the right to sell gold abroad, although they essentially did not have time to issue licenses for such sales in April-May.

The remaining part was purchased by the Central Bank in 2014-2019: about 60% of the gold mined by private companies went to the state. Photo: Ludvig14/wikipedia.org

This is confirmed by independent expert agencies; according to July data from the international auditing and consulting network FinExpertiza, the multiple increase in gold exports from Russia in the spring of 2020 was caused by two reasons: “increasing prices for the precious metal and the suspension of its purchases by the Bank of Russia.” At the same time, exports of other precious metals also increased, but not in such volumes: in particular, platinum (an increase of 26% to $1.64 billion) and silver (an increase of 18% to $73.6 million). Let us note that, of course, there is no talk of any sale of the gold and foreign exchange reserves of the Central Bank of the Russian Federation - this is also evidenced by the geography of the exporting regions, besides, the Bank of Russia only last year increased the share of gold in its gold and foreign exchange reserves to 20% (optimal, as it considers he, level). And it is possible to compensate for lost oil and gas revenues by selling gold and foreign exchange reserves (which, we note once again, the state did not do this year) only for a short time.

How much can you earn from gold?

As practice shows, by trading using signals, it was possible to get an increase of more than 4,000 points in just the first months of 2021 with gold in the trading pool of assets. Numerous geopolitical events and the onset of the coronavirus crisis have only increased the number of opportunities for making money on gold as a protective asset.

The chart below shows the historical highs and lows of gold price movements. As you can see in the picture, since 1971, gold has never fallen to its historical minimum, but only set new price records.

Specifications of short codes of futures and options contracts on the derivatives market

Futures contract codes consist of the following parts:
Futures codes

Option codes

Coding of the year of execution (field “Y”)

The year of execution of the futures and option is coded as one digit from 0 to 9. 2 – 2002, 9 – 2009, 0 – 2010, 1 – 2011.

Coding of the weekly option attribute (field “W”)

Algorithm for determining the Y, M and W fields for a weekly option:

1. The Thursday of the week on which the expiration day falls is considered.
2. Y is determined by the year of this Thursday
3. M is determined by the month of this Thursday
4. W is defined:
   by the serial number of this Thursday in the month (for options on futures on indices and currency pairs) Example 1
5. by serial number of Thursday in the month preceding the last trading day of options (for options on stock futures) Example 2

Example 1: A weekly call option on the RTS index with a strike price of 130,000 is exercised on Monday, December 30, 2021.
Thursday this week (January 2) is a non-trading day. Therefore, the execution date was moved to the nearest previous trading day. Short code: RI130000BA0A because the Thursday of the expiration week is for January 2021 and is the first Thursday of the month. Full code: RTS-1.20M301219CA 130000 Example 2: Weekly call on SBRF with a strike of 20,000 with an expiration date of 03/31/2021 on Wednesday. system encodes a series such as the April one, because Thursday of this week falls in April. Month code: D Week code: A (1st week of the month). The Thursday closest to the execution date of 03/31/2021 is 04/01/2020, i.e. already in April Short code: SR 20000B D 1 A Full code: SBRF -4.21M310321CA 20000 On the Moscow Exchange Derivatives Market, it is possible to create option contracts with zero and negative strikes. Let's consider an example of their coding for a monthly call option on the July Brent oil futures with execution on June 25, 2021 with a strike of -10. Short contract code: BR-10BF0 Full contract code: BR-7.20M250620СA -10 In case of a zero strike (0) for a similar contract: Short contract code: BR0BF0 Full contract code: BR-7.20M250620СA 0
For more detailed information, please contact the Urgent Department market by phone.

Can beginners trade gold?

Of course, but in the case of novice traders it is very important to find the right broker for trading gold - otherwise the lack of certain knowledge and experience can play a cruel joke on the trader.

In gold trading, as in trading any other asset, it is important to constantly improve. Broker NPBFX not only provides access to training materials in its Analytical Portal, but also regularly conducts online webinars dedicated to studying a particular topic in depth. The company also hosts webinars on gold trading. By constantly improving and having access to trading signals, even a beginner can cope with XAU/USD.

In addition, gold as a trading asset at NPBFX is available on all trading accounts offered by the broker. In addition to gold, the company offers more than 100 trading instruments (currency pairs, stocks, indices, crypto assets). And you can start trading with just $10 on deposit, which, provided you have a leverage of 1:1000, is a good chance for a beginner to try his hand at the real market right away without fear of losing a large amount. Detailed conditions are presented in the screenshot:

What is Forex

The Bretton Woods Agreement of 1944 pegged the troy ounce of gold to the dollar. In turn, the exchange rates of the participating countries were determined in relation to the US dollar. The result was a rigid frame that did not allow exchange rates to fluctuate. Rates could change within 1%. The scheme lasted until 1971.

In the second half of the 1970s, the gold standard was finally abolished. Large market participants began to exchange currencies at a free rate. The international interbank exchange is called Foreign Exchange (ForEx or FX).

The new rules of the game were determined by the countries included in the International Monetary Fund. Today there are 189 countries included. A quota system determines voting rights. Developed countries top the list. The USA is in first place with 17.46%.

What is traded on Forex

Forex is a global platform for trading currency pairs. Euro/dollar, ruble/dollar, British pound/euro, etc.

Cross rates are established on the exchange - operational information until the next change. The Central Bank of the Russian Federation fixes the value of cross rates every working day when trading takes place on the Moscow Exchange. Posted on the Central Bank website.

Later, British brokers identified new Forex instruments - CFDs. It has become possible to buy contracts for silver, gold, energy, and stock assets.

Where does the gold come from?

Forex is a platform for buying and selling CFD contracts, including gold.

NPBFX is a recommended broker for trading XAU/USD

NPBFX rightfully deserves the prestigious title of trustworthy “gatekeepers” in the brokerage industry. The company has a successful reputation and has solid banking experience: from 1996 to 2021. work with clients was carried out on behalf of Nefteprombank. In 2021, rebranding took place and services began to be provided under an independent financial brand – NPBFX.

Over the quarter century of its development, the broker has repeatedly proven 100% fulfillment of obligations to its traders, investors and partners. A lot of positive reviews about the company, the brokerage model of work without conflicts of interest puts NPBFX in the category of recommended brokers. As mentioned above, NPBFX will provide many beneficial advantages in gold trading - low spreads, no commissions for transactions and instant order processing speed, a wide range of deposit and withdrawal methods. It is important to note that NPBFX is included in the list of members of the International Financial Commission of the highest category A, which means that each client of the company is guaranteed insurance in the amount of 20,000 euros in case of disputes.

Register an account with an NPBFX broker and start trading profitably.

Example of a trade on XAUUSD

Let me give you an example of a real XAUUSD Forex transaction.

The conditions are as follows:

• Deposit (trader’s own funds) – $1000.
• Leverage provided by the broker: 1:100.
• Therefore, a trader can make a trade worth up to $100,000.

After analyzing the market situation, the trader decided to purchase 0.2 lots of gold at a price of $1,594.67. The deposit was 318.92. After the gold rate rose to 1624.01, the trader decided to sell the lot.

The profit was: 1624.01 – 1594.67 = 29.34*0.2*100= 586.8 dollars.