Gold can be traded without having it in your possession through the use of an online. This can be accomplished through the use of gold futures contracts, gold futures contract options, or stock in gold-producing companies. It is also possible to buy gold bullion bars and coins.
Whatever approach is taken to trading gold, it is necessary to have a proven gold trading system. This is because even though gold has always historically increased in value, that increase can fluctuate and is never perfectly linear in nature.
A system that can supply some edge or probability that gold is being purchased at the lowest possible price, or sold at the highest possible price, will enable a gold investor to maximize his or her gold trading profits. While the perfect system for doing this has, and never will be created, there are systems that are simple to apply to gold in the attempt to forecast future prices.
An example of such a system would be to base purchasing and selling decisions on the past history of price movements. In 2011, the price of gold briefly flirted with $2000 per ounce but has never actually been that high. Recognizing this, a gold investor could have sold gold futures as near as possible to $2000/ounce, then profited when the price of gold retreated to around $1700/ounce. This strategy is referred to as selling resistance.
That same investor, seeing that gold prices could not fall below $1700/ounce, could then purchase gold futures to lock in the profits from selling resistance, and possibly purchase additional contracts in anticipation of prices resuming their historical upward direction. This is known as buying support
An automated gold trading system allows the trader to analyze price charts for recurring patterns and decide where the possibility of a trend developing or reversing, or the continuation of a sideways channel offers the best potential for a positive trade. The trader then places orders called limit or stop orders. These orders will be executed only if the pattern revealed by the chart analysis actually forms. Acting on instructions provided by the trader, the trading platform places the orders and waits for the trader’s profit or exit price levels to be realized.
The advantage of automated systems is that the trader can make trading decisions outside trading session hours in a calm, logical fashion, and then leave the trading platform to execute the trades. The trader is free to get away from the computer screen and avoid temptations to override the trading system that are often the result of the strong emotions that are aroused by too close attention being paid to the market.
There is no shortage of effective systems for trading gold. The fundamental key is to test these systems in a simulated gold trading account without risking actual money. This will allow the identification of the gold trading system or systems that best fit the goals and temperament of the investor who plans to trade gold.