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Make sure gold is now widely loved and made by novice traders. However, before trading gold, it is very necessary to prepare gold trading steps so that the process can run optimally. The following four steps to trading gold according to Alan Farley.
A Brief About Alan Farley
Alan Farley is one of the experienced experts in the world of trading. A man who graduated from the University of Pittsburgh never wrote a book in 2000 with the title Master Swing Trader. Alan also wrote newsletters, swing trading daily for 16 years, and became a columnist for swing shift
Not only that, Alan Farley is also a contributor to CNBC and Bloomberg TV. One quote from Alan Farley is:
“I firmly believe that I can’t achieve success in life if I don’t help other people to be successful. Therefore, I have spent almost 3 decades guiding traders and investors about the very complex global market, showing them how to become a competitive market participant.”
With Alan Farley’s promising experience as an expert in financial markets, it wouldn’t hurt to see his writings on gold trading here.
3 Gold Trading Steps to Consider
According to Alan Farley, the gold market offers high liquidity and the opportunity to make profits, because of its unique position in the economic and political order of the world. The steps of trading gold are not difficult to learn, but trading beginners need to try to apply them with great care. What’s that?
1. Understand What Affects Gold Prices
As one of the oldest means of payment in the world, the use of gold has been rooted in the financial transactions of the world’s people. Almost everyone has a subjective opinion about gold, but basically the price movement of gold only reacts in a number of price catalysts.
The three factors here are the main catalysts that have the most influence on sentiment, trading volume, and the trend of gold movement:
- Inflation and deflation
- Fear and greed
- Offers and requests
Beginners to trade with high risk, when they trade gold in reaction to any of the above factors.
For example, when a sell-off hits global financial markets and gold, many traders assume that market fear will drive gold prices higher. They finally entered the gold market, without first reviewing what caused the decline in the global market.
When it turns out that the previous losses only occurred as a reaction to the technicals, the market will correct again, and traders who have bought gold before are sure to suffer losses.
2. Determine the Characteristics of the Gold Market
Gold attracts many people with broad interests, who want to buy or sell it. First, there is the “gold investment” gold bug which is a gold investor with a bullish bias.
Apart from collecting physical gold, this type of investor usually allocates most of their funds to invest in other gold instruments, such as gold company shares, stocks, gold, gold futures, and so on.
They are long-term players who are not shaken by a bearish bias. Gold bugs can affect liquidity in the gold market, as they tend to increase purchase transactions over time.
Second, gold is also an interest hedging activity of investors who have trading portfolios in various assets.
This activity does not solely support a bullish view for the gold market, as it aims to balance managed risk.
Therefore, the transactions carried out in each step of gold trading are always diverse, can buy or sell their gold holdings.
3. Learn to Map Long-Term Gold
When you decide to trade gold, Gold Trading, the next thing you can do is take the time to study the gold price movement charts.
According to Alan Farley, the gold price chart not only carves a long-term upward trend over several decades, but can also show weakness in the long term.
Historically, gold did not move much until the 1970s. After the abolition of the gold standard in 1971, the price of gold took off and prints a long uptrend, supported by rising inflation due to soaring prices of crude oil.
After peaking in February 1980, the price then dropped to close to $700 until the mid-1980s. US reaction to the tight monetary policy of the Federal Reserve.
In the 2000s, gold entered a historical upward trend peaking in February 2012 at over $1,916 per ounce. The gradual decline after that period then lowered the price to 700 points in 4 years.
However, gold had jumped 17% in the first quarter of 2016, posting its biggest quarterly gain in three decades. As of May 2019, gold was trading at $1,283 meters per ounce.
From an analytical point of view, the rise and fall of gold prices in the long term can provide a level of relaxation for traders or investors, to find entry positions easily.
Gold trading with the three steps outlined above can be a complementary guide before your day as a gold trader.
First, learn what influences gold price movements and how to trade gold before actually making a decision. Second, identify the characteristics of market participants to anticipate changes in price trends.
Third, take the time to analyze the long-term Gold chart, paying attention to the possible price levels to reference for trading.