Gold And Oil Trade

Gold Trading Basics


In the last 20 years, trading has become far easier for the average person. No longer do we need to telephone our broker and buy full contracts of whatever it is we are trading, no longer do we have to wait for that broker to actually find somebody to take the other end of our trade, no longer do we have to pay large commissions and no longer do we have to pay hundreds of dollars a month for data feeds.

In the last five years, there has been a dramatic rise in the number of excellent online brokers with user-friendly interfaces, no commission, minute differences between the buy and sell price, instant one-click execution and either tiny fractions of a contract or simply trading so much per ‘point’. Even better is the number of excellent spread bet companies which operate in the same (or better) way as these new brokers except that it is legally classed as betting. This means we don’t have to pay one penny tax on our profits! Sadly, you poor US citizens cannot ‘gamble’ online, meaning spread betting is not possible for you in ‘the land of the free.’ However, a new spread bet company is now accepting US clients - www.pi88.com

There has always been debate whether anyone can actually make a million a year spread betting and not be asked for any money by the Inland Revenue! Take it from me - it is impossible they will ever be asked. The reason for this is that if profits were taxable, then losses would be tax deductible and, since most people lose all their money, the Inland Revenue would be net losers! Now that is indeed an impossible situation, is it not?

I’ll explain the basics of gold trading as simply as possible. Like every other financial ‘instrument, the price of gold goes up and the price of gold goes down. It is quoted in US dollars per ounce and is currently around $950. It typically varies by $10 to $20 each day – a typical day’s variation of 100 to 200 ticks. A ‘tick (or pip)’ is the smallest unit of price movement and there are ten pips to the dollar as far as gold is concerned. Therefore, a pip is 10 cents.

Unlike most other tradables, a point is different from a pip with gold. A point is ten pips, so life gets complicated. Brokers vary on this but mine has a minimum of £10 a point, which is the standard £1 a pip. If you don’t know this, it is a little scary opening a trade at £10 a point if you are used to trading, say, currency, at £1 a point! It’s the same thing. Some new-style brokers may just express the value as $1 a point, meaning pip. Be clear…

So, we now know that gold rises and/or falls by many dollars a day, or several hundred pips. Therefore, as a general idea, 10 pips is nothing, 50 pips is a handsome amount and anything over 100 is very good, for a day’s trading. After all, if we are trading $10 a pip, 100 of them is $1,000 – not a bad day’s work and by no means unusual for those who trade at this level. I’ve traded at twice this and my record is a loss of $20,000 of my own money in an afternoon. Nothing to boast of! I would have actually made half of it back in an hour but my account was cleared out and I only had enough left to trade for $20 a pip to recover $1,000 (instead of $10,000) on the bounce back. Ah, foolish days.

Enough idle reminiscing. The speed at which the price moves varies tremendously according to conditions. Today, for example, the price moved less than 10 pips in 90 minutes just after I opened a trade. Later, it moved well over 100 pips in under half an hour (yes, in the direction I wanted). I closed that trade for 150 pips profit! It often moves 20 pips in a few seconds. Get used to the fact that the market can and does everything and anything. Most of the time, it moves in expected ways but things can get crazy…

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 and bought it back for $950 – thus pocketing $2 on every ounce. Like the example above, we make the same $200 on the deal.

So, unlike those ordinary mortals who buy things, shares and bonds, we can profit no matter whether the price rises or falls. Just so long as we get the direction right, we’ll soon be millionaires…

Because we are very smart traders operating with high tech trading software, all this can not only be done almost instantly (the price we click should be the price we get) but also we can place automatic orders to close the trade at pre-determined levels either to pocket our profit (a limit order) or to cut our losses (a stop or stop loss order). Briefly, these are known as stops and limits.

For example, we buy at $950 and place a limit at $952 and a stop at $948, so now, if the price touches either of those values, the trade will automatically be closed and we will win $2 or 20 pips or lose $2 or 20 pips. If we sell at 950 we would place our limit at 948 and our stop at 952. Notice that I’ve stopped wasting ink with dollar signs. Traders don’t use them – inefficient and irrelevant.

That is buying and selling the actual price of gold. In trading, we have ‘leverage’ and we effectively trade so much per pip. For example, the minimum is usually $1 a pip, so in the example above, we’d win $20 or lose $20. At $100 a pip the figures would be $2,000 either way – that’s leverage!

The last complication to grasp is the ‘spread’ or difference between the buy and sell price. It varies from broker to broker but should be between 5 pips ($0.50) and 10 pips ($1). So, our price becomes 950.0/950.5 – in fact, some modern brokers quote to half a pip so it might be 950.05/950.55, just to make life even more difficult. Basically, forget the second decimal place altogether; as if it weren’t hard enough what with pips, points, spreads, selling and buying!

Basically, what the spread means is we’ve lost that before we even start – it goes straight into the broker’s pocket and we have to make those 5 pips back before we begin to profit. Remember, the spread will be added on to our buy price and taken off our sell price, making it harder for us to profit in either direction. You need to play around with a demo account to understand what on earth is going on – believe me. When ever I try a new trading platform, I’m flummoxed, so beginners don’t stand a chance!

Regarding candles by the way, red is a downward movement (price reducing) and green is upwards (price increasing). The wicks and tails show the extreme prices and the start and end of the candle body show the opening and closing prices. So, top to bottom on a red candle would be the high, the open, the close and the low of that hour (on an hour chart). Top to bottom on a green candle would be the high, the close, the open and the low. Differing shapes indicate various likely further moves…



If you understand the above, then you know all you need to know!

To open demo account click here GOLD DEMO ACCOUNT

The Basics of Trading Oil

Trading oil is exactly the same as trading Forex, stock indices, or anything else. Trading, as opposed to buying shares, allows two big advantages. The first is that we can profit from falling prices just the same as rising prices, by selling rather than buying. The second is 'leverage' which allows us to effectively buy huge quantities with just a small deposit. This means we can pocket a decent profit from a small move up or down in price. Of course, this is potentially risky but we always put in an automatic 'stop loss' to close the trade should the price move against us by a set amount. Likewise, we put in an automatic 'limit' to close the trade for a set profit.

Many Forex brokers also allow you to trade oil, so setting up an account is no problem at all. Forex is mostly traded on the MetaTrader 4 platform and this often includes oil without people realising. In fact, most MetaTraders have all sorts of additional instruments, often shares and sometimes even including the DOW. To reveal these, you need to right click in the Market Watch window (where the currency pairs are displayed) and click on 'Show All'.

We obtain our signals from a free, everlasting demo version of MetaTrader but you can actually place the trades anywhere you like, including spread betting. The amount of capital you require varies from broker to broker but most will trade mini contracts and need only a few hundred dollars in your account. The actual risk will be even lower than this because we put in a stop of 90 pips (a $0.90 move on the price of oil). MetaTrader shows the daily 'spot price' for oil and both this spot price and the oil 'futures price' are available depending on which broker you use. The futures price is simply an estimated price for oil for delivery at a set date in the near future. It really makes no difference to our trading.

Here is how a typical trade works. We see that the quoted price is 81.50 - 81.56 so this means that we can buy at 81.56 oil and sell at 81.50 - the difference in prices being the broker's profit. We have a sell signal on our chart, so we sell 0.1 contracts or $1 (or £1) a pip. Now, a 'pip' is the smallest movement, which in this case is 0.01 or a one cent move. At the same time, we put in a stop loss at 82.40 (90 pips up in the 'wrong' direction because we are selling and want the price to go down) and a take profit of 80.00 (150 pips in the hoped-for direction). Then, we simply wait anything from ten minutes to five hours, on average.

However, if the TCCI changes colour, we manually close the trade (although, you can just leave it and wait for the stop or limit to be hit). Usually, we hit the limit and the trade is automatically closed by the software and the $150 deposited in our account. Of course, ideally we trade for a lot more - $10 a pip or greater. For example, trading a whole contract would have resulted in a $1,500 profit, which is quite realistic and not too bad for a few hour's 'work'!
All this and more is fully explained in the 20 page guide that comes with The Oil Trading Business System.



Suitable Brokers:

www.Avafx.com 24hrs, fast & trading from $0.10 per pip!

www.VinsonFinancials.com 24hrs

www.CapitalSpreads.co.uk fixed 6 pip spread, fast (I use them)

www.igindex.co.uk 24hrs excellent but variable large spread

www.futuresbetting.com 24hrs best spread betting but expensive

www.FXPro.com - accepts US traders. 5 pip spread

www.globalfutures.com - accepts US traders

www.tradersplatform.com - accepts US traders

www.cleartrade.com - accepts US traders

www.optionsxpress.com - accepts US traders

www.mbtrading.com - accepts US traders

To open demo account click here OIL DEMO ACCOUNT


MARKET UPDATE

Asia Session
Published: March 2, 2009 2:15 AM

The US Dollar began the new week higher against most majors today as sources spilled the beans on a possible $30 Billion extra in aid to embittered insurer AIG, and the leaders of the European Union rejected a plan to send aid to eastern Europe, thus spreading the fear that the crisis in Europe will become even more consuming. EUR/USD began the day opening lower by about 40 pips at 1.2631 and continued to flow lower until hitting the bottom at 1.2545. The noble leaders of the EU voted down a request of 180 billion Euros to help shore up the financially crippled banks of the old eastern bloc of Europe, and the EUR/USD suffered for the lack of foresight and action.



As the equity markets in Asia were crushed once again, the Dollar and Yen benefited greatly. EUR/JPY saw 123.55 highs early on but quickly fell to a low of 121.91 as the dysfunction continues into the new week. The US Dollar has emerged as the least risky of the major currencies and has gained ground in periods of despair in the equity markets. USD/JPY hit an early low of 96.91 quickly, but as the Dollar strengthened 97.90 was the recorded high. Finally, spot Gold made some nice gains amidst the gloom, rising from an open near 940.00 to top out at just under 954.00 per ounce.



This week's focus will be on interest rate decisions from Australia, England, Canada and the Euro Zone.......





London Session
Published: February 27, 2009 8:17 AM

Risk aversion remained the flavor into the London session as nationalization worries resurfaced with the US government now expected to take a 40% stake in Citi. European bourses are getting pummeled and currently off about -2.5% on average while US futures suggest the S&P will test the critical November intraday low support by 741 today. With month-end upon us, we are also hearing that of lot of the USD bullishness is also driven by portfolio managers rebalancing holdings.



Eurozone data continued to print weak as the unemployment rate rose more than expected in January to a two-year high of 8.2% from an upwardly revised 8.1% the p



rior month. Meanwhile, consumer prices slowed to 1.1% for the same month and remain well below the ECB 2.0% target. EUR/USD shed about -40 pips and was sitting near 1.2660 ahead of the NY open. The 1.2630/20 overnight lows are immediate support and below there should open up potential to 1.2550/00 next.



The yen crosses were lower. USD/JPY slipped -30 pips to 97.50 while EUR/JPY was punished a more aggressive -80 points into the 123.50 area. Profit taking on USD/JPY longs is likely driving the move here as the yen's safe haven status continues to be questioned. USD/CAD also saw a decent 60 pip move higher to well above the 1.26 level and we are hearing this is driven by buying interest into the 1600GMT fix.



The NY session now has some top-tier economic data up that could elicit another leg lower in risk trades. The second cut on US 4Q GDP is expected to show a downward revision to -5.4% from -3.8%, in a reminder that things continue to be worse than previously perceived. Canadian current account also out at 1330GMT could see USD/CAD extend gains if it comes in below the anticipated -5.1B decline for 4Q. Chicago PMI at 1445GMT and the University of Michigan consumer sentiment indicator at 1455GMT round out the session

New York Session

Published: February 26, 2009 5:25 PM

The price action was mixed in NY trading as the flows around tomorrow's month end continue to be volatile. US stocks shed another -1.5% in broad terms as details of Obama's massive budget and $1 trillion in proposed tax hikes led shares lower. The 7-year Treasury bond auction, the first since the early 1990s, was described as sloppy though the bid/cover of 2.1 suggests demand for US paper remains robust. Bonds were lower as demand for higher yields drove prices down. The 10-year rate added 7bps to near 3.00% while the 2-year was pretty flat at 1.08%. Gold lost another -$7 towards 946 as profit taking continued. The precious metal briefly tested 935/930 support and this is expected to be an interesting level as we head into the weekend.



EUR/USD edged about -50 pips in NY trading as failure to take out the 1.28 barrier put downside pressure on the pair. The 200hr SMA by 1.2710 and hourly trendline by 1.2670 now look like the next barriers to further weakness. USD/JPY was bid more than 30 pips despite the weakness in stocks as the yen safe haven myth continues to evaporate. The pair was sitting near the 98.50 pivot at the NY close and 99 looks like the next hurdle in the rally. USD/CAD surprisingly jumped about 95 pips to 1.2530/40 despite the pop in oil prices to near the $45/bbl level. Look for this correlation to resume once the murkiness around month-end subsides next week