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How To Trade Gold Futures

Let me start out by saying that Gold is a market a lot of traders think is an easy way to make money.  Let me assure you, there is no easy way to make money.  Trading Gold Futures is hard work and requires, quite a bit of training.  You need discipline and a strict plan on how you are going to trade.  You need to test your plan and then demo trade for a month.  This will get you ready for trading real money and give you the best chance of success.

We all know that gold demand for Jewelry and manufacturing is something that keeps demand for this metal high.  Did you also know that banks or governments can create more demand or supply of gold with their huge stockpiles of gold.  It is seen as an anti-inflation hedge, so you can see some large price moves in Gold when you have Monetary Policy or Inflation announcements.  I will show you a screen shot of an ECB rate decision and how Gold can move.

The first step is to setup a Futures Trading account.  You can do this form most Brokers, like

You need to have at least 5,000 to open most accounts and that is the near the minimum margin requirements to trade one contract.  For each 10 cents of movement in the price of Gold you get $10 of profit or loss.  That is why the margin is high, the market can move in waves of $10 in the price of gold which is $1000 of profit or loss.  Look at the chart from today.  You will see we were able to capture a very nice large move after the ECB announcement.

Gold Futures Trading Chart

If you are brand new to Futures Trading, then you should learn more about Futures Trading at http://www.cmegroup.com/trading/metals/

Gold will usually move fast after news and then settle down.  So one of the keys to your trading is to trade early in the morning, around 8 to 10 AM New York time and then be done for the day.  In the example we were done trading this market in the first 30 minutes of trading and the market just chopped around after that.

So, for those that like to trade a market which can move very fast at times Gold is a great market.  I just want to caution folks that it can move very fast against you.  So, you need to make sure you have stops in place, so that when you don’t win on a trade, you only lose a small amount.  In all of our systems, we have exact Entries, Stops and Targets on every trade.  The risk on the above trade was $580 on one contract and double that if you are trailing a second position.  Start slow, with one contract, demo trade and get ready to turn Gold into Green!