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Gold trading is the most misunderstood investment. The great thing about trading gold is that it usually moves up when stocks are down. Ant gains in trading gold will be enough make up for your any shortfalls in
stocks. It is usually a winning strategy to learn how to trade gold. As inflation creeps up the price of gold will rise. The great thing is if gold in falling you can go short and still make money.
The concept of trading gold goes like this. If
we think that the price of gold is going to rise, we buy it (obvious).
If and when it has risen, we then sell it for more and we’ve made a
profit. Now, with trading, there is no need to buy the actual gold. We
just make a contract with the broker to buy so much ($ per pip) and
when we sell it, he gives us the profit (or deducts the loss from our
account if we got it wrong).
Suppose we had to actually buy the gold. OK, we buy 100 ounces for
$95,000. Four hours later, the price has risen to $952 an ounce and we
sell it for $95,200 – a profit of $200 or exactly the same as trading
for $10 a pip because the $2 rise is 2 points or 20 pips. Now, which
is better? Paying $95,000 for a wheelbarrow full of gold and trying to
sell it to someone four hours later, or trading it instantly for $10 a
pip?
Right, anyone can understand that. Now we move outside the box
because, in trading, we can sell it before we buy it! We want to do
this if we think that the price is going to fall and we wish to profit
from the downward price movement. In essence, we sell the gold to our
broker and contract to buy it back later. If the price does indeed
fall, we’ve sold it for, say, $952 profit.
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