Due to its unique position within the world's economic and political systems, the gold market is highly liquid and offers excellent profit opportunities in nearly all markets. Some people choose to own the metal outright, but speculating through futures, equity, and options markets offer immense leverage and low risk.

Participants in the gold market sometimes cannot profit from gold price fluctuations because they have not yet learned the unique characteristics of world gold markets. Furthermore, gold instruments are not all created equal. Some are more likely to produce consistent profits than others.

Learning to trade yellow metal isn't challenging, but the activity requires specific skills. Those new to trading should take these four steps slowly, but seasoned investors can benefit from incorporating them into their daily trading routine. In the meantime, experiment until you become familiar with the intricacies of these markets.

Ways to trade gold online?

Following are several ways to trade gold online.

Gold stocks

When trading gold online, the most common way is indirectly buying gold mining stocks. This method of trading gold online means that you are not required to store the physical commodity on your property or somewhere else.

It would help if you also kept in mind that each method has its advantages and disadvantages.

Gold ETFs

The use of gold Exchange-Traded Funds (ETFs) is another indirect way to invest in gold. This fund tracks the movement of a publicly listed index, index basket, or underlying asset.

Gold ETFs track gold value in various ways; they may heavily invest in gold itself, own shares in companies related to gold, trade derivative instruments such as futures and options (which we will explore next), or have a combination of these methods.

Gold futures

A futures contract is an agreement between two parties where one buys or takes delivery, and the other sells a commodity in the future.

The Chicago Board of Trade (CBOT) offered the first futures contract for corn in 1851. The Chicago Mercantile Exchange can be used to trade gold futures contracts.

Gold options

A gold options contract entitles its buyer to buy but does not require them to sell the underlying asset at a predetermined price before or on a future date.

Gold CFDs

Through a Contract For Difference (CFD), traders may speculate on the price of an underlying asset, such as gold, and allot long or short positions to profit from price changes.

Steps to start online gold trading?

The following section is where things get interesting for those interested in online gold trading. The following section will describe some gold trading steps. Making sure you use the right trading products and tools is the key to setting yourself up for successful trading.

Step 1: Define your goals

Understand why you want to participate in the gold market and develop a basic trading or investment strategy.

It would help if you decided whether you want gold to be a store of wealth, a form of economic insurance, or to make money by trading it for profit. Determining your investment goals is crucial.

Step 2: Use a trading strategy

A trading strategy aims to help traders spot possible market moves by analyzing the gold price. Since there are so many ways to analyze a market, creating a list of rules is crucial to ensure that you remain disciplined over time. Gold can be analyzed in several ways, including:

Fundamental analysis: It consists of analyzing economic statistics and sentiment about gold.

Technical analysis: This process determines possible entry and exit levels by studying price. In general, the analysis of price involves chart patterns, price action, and technical indicators.

Step 3: Pick a gold broker

The best online broker for your needs and a demo account allow you to test your trading plan once you have defined your objectives and developed an appropriate strategy to meet them.

Gold bullion and gold coins can be obtained from a dealer who specializes in selling metallic gold if you plan to invest in and possess physical gold.

Step 4: Read the long-term chart

Spend time learning about the gold chart from the ground up, starting with a century-old history. The metal has not only established trends that have lasted for decades but has also steadily declined for incredibly long periods, denying gold bugs profits.

In a strategic sense, this chart identifies the price levels that should be watched if the yellow metal tests them again.

Gold's recent history showed relatively little movement until the 1970s, when it began a long uptrend, fueled by rising inflation brought about by rising crude oil prices. After reaching a high of $2,420 an ounce in February 1980, the price of gold dropped to about $800 in the mid-1980s due to restrictive monetary policy from the Federal Reserve.

Gold went into a downtrend until the late 1990s, when it entered the historic uptrend, culminating in a high of $2,235 per ounce in February 2012.

In the four years since that time, silver has lost more than 600 points; however, as of May 2022, it's trading at $1,882 per ounce, following a surge of 10% in the first quarter of 2016 for the biggest quarterly gain in three decades.

Step 5: Start trading.

Then, you can trade real money after testing your strategy in an online demo account. Developing the discipline required to stick to your trading plan is essential since you will likely react emotionally if you make or lose money.

Consider your risk tolerance and amount of money in the account when implementing sound money management practices and position sizing techniques. It is also suggested that stop-loss orders be used along with other risk management techniques. 

Final thoughts

Trading gold requires traders to become familiar with its characteristics, how it is correlated to other assets (such as stocks and bonds) and whether it suits their trading strategies.

To begin trading gold, traders should decide when and choose the most suitable product for their trading style and strategy. Spot CFD products typically have lower spreads, while futures CFD products are more likely to see higher spreads without daily swap charges.

To determine whether their strategy will work well when dealing with the asset, traders should test it in a risk-free demo environment after determining which product best suits them. Their trading style may determine whether the volatility in gold is too high or too low for them.

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