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What I did next, in hindsight , was extremely stupid. Hopefully some big gun will read this and bring them to bear. Just do a search for high yield investment programs on Google and see what you get. To be fair I now do see a number of government websites warning you about these, although I may have been blinded by the money, back in I did not see any warnings.
If you get into one of these programs, all agreements are made electronically, email and inevitably you deal with some the other side of the world. You will see returns coming back to you for a few months while at the same time you are sent loads of information on other really good high yield investments. You get regular updates and everything looks good, the cheeky bugger I was dealing with even sent me pictures of his family holiday in Costa Rica, then all of a sudden you are told the fund is bankrupt and there are no more payments.
Oh well my fault for being so stupid to begin with, hope he enjoyed his holiday! So my advice is to steer clear of stuff like that, again if you want further advice on something email me. The second place I lost money was with people phoning me and selling me forex options.
I had read a little about forex funds while looking into high yield investments. Now these people calling me sounded a lot more professional, they explained the whole option thing to me and how they recommend I use a weighted straddle technique to get in on the action on the euro. Again there are s of companies doing this, if you want them to call you just do a search for forex options or investments and fill out a few online questionnaires.
I did this a couple of times back in and I have had people calling me weekly for the past 6 years trying to sell me investments. The people and companies selling option based investments to the semi-informed public are no less crooked than the high yield investment people who just take your money and go on holiday with it.
While the options selling people are slightly more professional, all they do it confuse you with too little or too much information, act as the counter party to your options and tell you what strike price to use. As mentioned the sales techniques combine too much information, too little information and on many occasions aggressiveness. It seems like some people have been driven mad by money, ok man, calm down, I am sure you know what you are talking about.
I have been cold called by s of people trying to sell me options. I lost loads of money with an investment advisory based in Barcelona. The whole experience was so terrible, it was in December this happened, I am sure Windsor limited changed its name a long time ago. I was on holiday in Johannesburg at the time; I can still recall how sick the telephone conversations I had with them made me feel. Call it stupidity, call it determination but despite losing so much I still believed I would be able to live off my savings one day.
I kept looking, this time looking at how I could trade forex myself. I soon found my first forex brokers website, I saw the charts, I saw the trade station, I read the briefs and I was sold. At the time I believed I had made it past the sharks and was with the good guys who would help me make money on forex. It was simple, accessible, and there were loads of educational resources. I did not know it at the time but I was just swimming with a different bread of shark.
I can tell you now although online forex brokers on the whole provide and excellent service their main objective is to transfer the funds from your trading account into theirs, much like the firms selling forex options, online brokers use a combination of too much information, too little information, miss-information and generally suggesting trading parameters and methods that are unfavorable. I cannot complain about on line forex brokers too much as they provide the general public to the once exclusive forex market and generally their trading tools are good, however much like a casino giving players an opportunity to gamble online brokers use loads of subtle tricks to part the would be trader with his margin account.
It is not only the online forex brokers that are attempting to make money from the aspiring forex traders, as stated in the introduction there are numerous forex alert providers, managed account services and people selling trading systems and forex trading courses.
Believe me when I say none of these people are for real, they are all selling bogus products, selling lies, trying to steal your money! If you do a Google search you will find s of such forex trading related products and services. This I believe is due to the fact I was so badly burnt by my previous investment attempts. I never risked any money on the spot forex market until I was able to make consistent profits on a demo account. Thanks to my adamants, to not trade with real money until I had a method of trading I knew worked, I have been able to persevere with my forex endeavors without wiping myself out.
The remaining chapters will deal with my experiences of legitimate trades and what you need to do to succeed in the forex market. However there is a ton of misinformation in these courses they explain techniques to you that are based on stock trading and fall down when it comes to the currency market, there is also a distinct lack of information in these courses, they touch very lightly on the history of money, the reasons for the relative value of money, the structure, participants and purpose of the forex market.
They really just do not give you the correct picture of the forex market. What is important for you to understand is that the vendors of most of these forex trading courses and even forex mentorship programs for that matter are failed traders. These people have no interest in your success in trading; their only concern is that you purchase their course and then their advanced course and then their mentorship offerings. These people want your money, they will sell you anything to get it and they do not care if you make it as a trader.
In the case of brokers offering training courses, their interests also lie in giving you enough information to make you a danger to yourself. Can you believe that virtually all vendors of online forex trading courses are little more than crooks, selling quickly put together courses whose only intentions are to make as much money off you as possible? The vendors of these courses must have some good intentions as much of the material in the courses is correct, however if they have any thoughts that their courses will enable some one to make money from forex they are sorely deluded.
It is the lack of information and the blatant misinformation in both the courses themselves and in the advertising of these courses that in my opinion make these people crooks. There are a small percentage of forex training courses that do give you the correct information, if you are lucky enough to do one of these courses you will soon realize that no course by itself, irrelevant of cost, will make you a successful forex trader.
This comes from developing a clear idea and being able to anticipate what the large forex market participants are doing, this comes from understanding global economics and through years of experience watching global financial movements, this will be covered in later chapters.
Now I would like to go through the material covered in some of the online courses I have taken in the past, to present , the courses were very professional and the people offering the courses are still around so I will not cover their material in too much detail. It is not my intention to state here what these courses should have said but merely to point out where they lack information and where they have provided completely wrong information. A professional forex trader must have a clear picture of what the forex market is, this is especially important as most of the time the trader is sitting at home with little more than numbers on a screen to guide him.
To be fair, to a certain extent, these courses do cover this information, central banks, investment banks, hedge funds, corporations, inflation, interest rates, balance of payments and the economic news releases that impact exchange rates. Where they fail is the proportion of the material that is dedicated to the fundamentals of the market against the proportion of the course dedicated to technical analysis.
The big forex market movers almost exclusively look at fundamental economic conditions when deciding where to invest money, yet these courses dedicate little more than a couple of chapters to this. The little information they do give you on the structure and fundamentals of the forex market excludes vital information regarding the history of money and current characteristics of money, the history and current structure of the international banking system, the international money markets, global economic cycles, and the physical underlying structure of the market.
They fail to impress upon you exactly what is happening, whose money, coming from where, going to where, and why? All these courses have left me with these questions. Even information provided to me by legitimate successful traders has left me with questions regarding what is going on with the forex market on a day to day basis.
No forex training courses will teach you what is fundamentally going on with the forex market at any given moment, this changes day to day. Banks employ s of people to analyze the global economy, no course will teach you this, but it is possible to learn this, you firstly need the correct information and then long term exposure and experience of the global financial trends, you also need contact with an already successful trader who you can learn from.
I will recommend legitimate educational material and mentoring services in the latter chapters of this book. On top of the lack of information into the fundamentals of the forex market, the second failing of most of the online forex training courses is misinforming the student as to how to analyze the forex market. My short answer to all of the technical analysis that can be applied to price charts in the forex market is; by itself none of it works!
In later chapters I will explain to you what I have done to prove technical analysis by itself does not work and no consistent prediction of the future movement of exchange rates can be gleamed from historical price data alone. There is a general accepted notion as present by forex brokers and vendors of forex trading courses and other systems that the forex market responds well to technical analysis. This is an out and out lie, and reinforces the statement that the majority of vendors of forex trading related services are little more than crooks.
Technical analysis serves two purposes, people can make money teaching it and forex brokers can make money from people using it. The final failing of the majority of forex training courses and forex brokers alike is the suggested money management and risk management strategies, leverage your account at , always use a stop loss and keep your losses small, let your profits run.
All of these are commonly accepted truisms in the forex market, so it may be a surprise for you when I tell you these are not the strategies the big professional players are using and if you use these strategies you are liable to get wiped out pretty quick. It is not my intention here to explain exactly what these training courses should have said. There legitimate documents and courses available from legitimate successful traders covering this 7 information.
I will cover much of this information in the latter chapters of this book along with directing you towards additional information vital to your success as a forex trader. The next chapter will deal with another breed of forex shark, the vendor of the online forex trading system. These guys are complete crooks and deserve to be thrown in jail.
I have absolutely no worries about naming these people and exposing their scams, they may as well steal handbags for a living , they are that low. If you bought one of their systems, do not worry, I have bought many of them. I just fail to see how some one would want to make money so dishonestly. Well the wheel turns people and you are going to get named. I have absolutely no idea where to start!
But not to worry there are really clever, helpful, honest people on the internet who will help me!? The first forex system I bought is still actively being sold on the internet. I can tell you now this sort of thing is the absolute biggest load of BS. This guy is selling lies and deserves to be thrown in jail. I have his e-book and will be more than happy to send it to you if you request it. Looking at this whole thing in hindsight I can hardly believe I was so stupid as to believe the claims he makes on his website.
At the time I was oblivious to the methods and motivations of the major forex market players, hedge funds, high worth investors and investment banks. There are literally s if not s of websites and people offering simple systems to trade the forex market. Are all these providers of forex systems crooks and con artists selling lies and complete BS systems based on technical indicators they have sucked out of their thumbs, Yes!
Do they all know they are selling lies and conning people for a living; yes! Are they all failed, would be traders who lack the intelligence to make money from the market and have turned to making the lives of honest people harder, yes! Do they know every word I am saying is true, yes! Should they be publicly flogged and thrown in prison, yes!
If you happen to be one of the afore mentioned people and have made money from aspiring traders with bogus systems you made up you yourself or a buy sell alert service you know does not work, then please after you have refunded every cent you made from vulnerable aspiring traders, go and kill yourself, society does not need you. This book is my effort to add something honest to the online marketing of online forex trading and expose the sharks.
No matter what method a trading system uses there are basically only two things a trading system has to do. Firstly identify a trend and secondly buy a dip, sell a rally or enter on a break out. Obviously there is more to take into account, risk management, targets and fundamentals. All on line forex systems I have purchased have completely ignored the fundamentals of the market, with the exception of a system suggesting you gambling on economic announcements like Non Farm Payrolls and rate decisions.
The forex trading systems I have bought all focused on purely mechanical technical criteria for entry points and targets and their risk management strategies focused on extremely mechanical support and resistance levels based on short time frames. Trust me when I tell you if you follow these systems you will get wiped out and the people who write these systems know this, there is no way in hell any of these system will work.
We will now review one of the on line forex trading systems I purchased in the past. The first thing the e-book containing the trading system talks about is background into the forex markets, pips, spreads, brokers, etc, etc. We will not beat around the bush and move on to the meat of their trading system.
Identify a trend. Please understand I am joking here, I am almost as full of crap and the guy who made up the system to begin with. Identify a dip to buy. This system uses 2 x higher highs. The manual this system is outlined in makes little mention of what time frame to use when looking for consecutive higher highs, saying the system can be used with many different time frames. But when you see 2 x higher highs you can be sure a dip is turning back into the longer term rally………………………Absolute crap!
What I say now is the closest to an absolute truth you will get in the forex market, which is it is impossible to anticipate future price movement based purely on historical price movement. Identify a target. His own example shows just how ineffectual this Fibonacci method is for planning your targets. From the above picture you can see if you had gotten out on Target 3 you would have gotten out of the market 4 days too early.
As said before you cannot predict future price movement based solely on past price. As we will come to in the latter chapters of this book, the only way to effectively identify entry and exit levels is to base your decisions on the underlying fundamental factors driving the big players in the forex market.
Math, indicators and Fibonacci do not work! Do some risk management As I said if you would like a copy of his e-book forex trading system I will be happy to email it to you, but please do not base you trading on it. I will tell you now risk management methods based on mechanical factors and disregarding underlying fundamental sentiment and the fact the forex market is used by millions of people just to go about their daily business will wipe out your account quicker than you lose chips on a roulette table.
Now the poor unfortunate aspiring forex trader, who buys these on line e-books, is obviously caught up by the marketing and sales pitch of the whole thing. What he then reads in the e-book all makes sense and it matches all the stuff he has learnt about in the forex training courses he has taken.
So he starts trading this system with high hopes and high expectations only to have them cruelly smashed one failed trade at a time. Does this mean the new trader is doing something wrong or is a bad trader? No, the lower life form he bought the book from has lied to him and stolen his money with no regard for the life, welfare or emotional state of the poor would be trader.
The wheel turns my friends; these people will get what is coming to them. After failing to make this bogus forex trading system work I decided to pay for an on line alert service, this was now real time data coming direct to my chart feed from professionals who had been getting fantastic results with their proprietary indicators over the last 24 months. A proven track record and the removal of my subjective self from my trading will surely improve my trading results!
It is through these experiences that I can safely say it is impossible to anticipate future price movement based solely on historical price movement. Following this we will cover another online forex trading system I purchased that used no indicators and made use of fundamental economic announcements. To be fair this system was better, however knowing what I know now, I fail to see how this system could ever have worked, that said my many endeavors to make his system work all failed.
At this stage I just did not understand the fundamental structure and driving forces of the forex market. If you do not have this no matter how good your system is you will fail. It is unfair for me to pass comment on all the alert providers with the exception of saying if they use technical indicators to generate the alerts they are crooks and they know it.
Just tell me what indicator can measure the potential for change in the fed funds rate, or predict when, how much and to what extent the balance of payments will affect the exchange rate. Again they have great websites, and really good past performance figures along with lots of good relevant information.
It all looks good and I would even go as far as to say it is professional, there is always some one on the other end of the phone. They make it sound like the have discovered the secret math formula that has unlocked the secrets to unlimited profit potential in the forex market. All you have to do with this software it automate it to open and close your trades for you and you will have an endless stream of wealth flowing to you every month all for the cost of their monthly subscription.
Oh even better they run a managed account service based on their alert signals, I could just give them my money and let the profits role in. Oh thank you god, thank you for letting me find their web site, finally I am going to be able to retire in a couple of years.
Again the poor, unfortunate aspiring forex trader has been conned by the sharks, these people know their alerts do not work and they still sell them. They know they do not work but they vehemently defend there products on the forex trading forums. To me these people are nothing less than sick, and are little different to drug dealers. The unfortunate thing is it is completely legal for these people to sell you lies and part you with your money.
These people are complete idiots who think the rest of the world is a stupid as them. Well I used and paid for their service for several months trying my utmost to make profits on a demo account, unsurprisingly this did not happen. Each time I phoned them for support or advice they were always so supportive and polite, what a bunch of lying idiots. These people made it sound like they were unbelievably educated and clever to be able to program chart software with buy and sell alert, but I was working as a software engineer, I knew how to program.
I had done the forex courses and I knew about indicators, risk management, lot size etc, etc, etc. These online alert people were nothing special I could do what they do. This is the community of people who have been tricked by the online forex marketing scams, brokers, courses and all the other sharks on the internet. These people have been blinded by the 11 online forex marketers and trapped in the world of technical analysis.
They stumble around in this cruel world bumping their heads on one failed system after another. I know there are s of you people out there; I can see the 10 x s of users registered on forex forums. I can see from your forum posts you have been tricked by all the forex sharks on the internet. I have been in your boat, worked with you and contributed to your efforts to crack the secret forex money making indicator. This book is my effort to help the many people out there who have been tricked and are in the process of giving all their money to the sharks, not to mention their emotions and minds.
If you are trying to trade forex using technical analysis and you are reading this then this book has fulfilled its purpose. You are probably going to have to experience these things for yourself before you yourself know them to be true, this is completely natural , I would not expect you to behave any other way, but at least you have read what I have to say and will be better prepared to deal with forex sharks.
I will say it quiet plainly is that you will not learn to trade successfully from one of these forums. With that in mind however these forums are great, if you are new to forex and you do not personally know any one who is into it, they are a great place to meet other would be traders. You can also get a good idea of the different methods employed by these s of would be online traders, the majority of these people are intelligent individuals as is evident in the numerous and wondrous techniques they have come up with.
In many cases there are also chat rooms available, you can sit chat and trade with other online traders. For me this was a really great experience, at the time I knew no one who even had the slightest interest in forex and it was good to speak to like minded people, even if it was only on the internet.
If you are stumbling through the world of online retail forex trading, it if comforting to know there are s of people in the same boat. Some popular forums include www. Although I learnt little from these forums that ever helped me to trade profitably I did meet some very good, intelligent people, and learnt a lot about how not to trade.
This again highlights my lack of respect for the many forex product vendors. Although I appreciated the contact I had with all the people I met on all the forums, I felt the forum I gained the most from was www. The first really good person I met on the forex forums was a welsh lady going by the name of Bunny Girl.
My first couple of years learning forex had over loaded me with techniques and information, I was loading up charts with s of different indicators, different time frames, tend lines, Fibonacci lines, candle stick identification. Her forum post was so popular I think I must have had over a thousand pages; it might even still be on the forum it was so popular. That was it, a single moving average cross was the only indicator used.
I did not know it at the time but this system was pointing in the direction of the only thing that works when trading forex, knowledge of the underlying fundamentals and discretion. At the time however I was blinded by programming my indicators into the charting software and getting my 24 hour a day online money machine rolling. This is what the online alert providers were using and with this I could back test the systems over 10 years worth of 5 minute data.
It was many years ago now I went through all of this and I dumped all this junk from my mind once I realized it would never work. I did keep records of most of the stuff. Here are some pictures of the Bunny Girls system programmed into the fxtrek charts. Note the values of the emas in the top left hand corner. The Long term EMA is white, the little brown and blue arrows indicate time when the EMAs cross, and the tiny blue and red little chevrons indicate the level at which to enter should that price be reached.
I would also only go long if the price was above the white, long term EMA and short if the price was below this white EMA. Looking at these things now they look pretty professional. I certainly have the option of selling this crap, but that is not why I am into forex. Now this was my first attempt at programming buy and sell alerts into charting software at the same time it was also my best effort, that is to say all other attempts produced no better results. I will mention two other techniques that I borrow from other traders and tried to program.
I will only talk about two others as they are frankly as bad as each other. After we have looked at a few more methods I will explain the results you get from back testing these systems over many years of short time frame price data. One of the other systems I spent some time programming involved defining a trend with Moving Averages, first mistake , then selling over bought levels or buying over sold levels based on the overall trend based on RSI, from looking at my notes I can see I also managed to throw MACD in there as well, more indicators better results?
Besides dubious back testing result what every trading system based on technical analysis and probabilities lacks is paying any consideration to the fundamentals of the market. I can see at the time I came up with this system I had absolutely no regard for the fundamental driving forces behind the markets.
The is no mention of scheduled economic data release, important speakers, interest rate futures or anything pertaining to what really moves the market. At the time trying to understand how the global economy and in turn how the forex market works just seemed way out of my league.
Investment banks employ s of people to analysis and make decisions on the global economy and where to put their funds, I had no chance at competing with them at their game. At the same time everyone on the forex forums was using technical analysis, it was what I had learnt about in the courses I have taken and even the brokers recommended you use it.
Here is a different trading system I came up with. Establish trend with an 89 and EMAs on close 2. Establish Support and Resistance with Fibs and recent price levels 4. Entering trades 1. Enter only if conditions occur between 8am and 11pm 3. Stops other side of recent Sup or Rest levels or the Use a 50 pip moving stop - yes definitely 4. Re-enter correctly if divergence occurs 5.
Calculate Targets with "Risk Probability calculator" C. Exiting trades 1. Move stop loss in 50 pip increments 2. After T1 is reached significantly tighten stop loss if If retraction and stop out occurs re-enter provide above entry conditions match see A. If 89, EMAs cross while trade is open close the position or move stop to break even immediately 5. Please, please - accept the trends and learn to be stopped out Bunny girl I put so much effort into planning and following these systems and would be crushed time and time again when they did not work.
It was thanks to the vast amount of price history provided by the fxtrek charts, I was able to program and back test thee system over a very long time to see exactly how effective an automated indicator based system could be. Here is a picture of the above system on the charts, again this is just to show you how not to trade forex.
The next system I got from a guy going by the name of autofix on the www. It was at this stage that he transformed himself from helpful aspiring forex trader, with a good knowledge of technical analysis and programming into a lying con artist. Here is a forum post of his and the accompanying performance results: Trade in the minute timeframe. Use three consecutive higher lows to trigger long trades. Use three consecutive lower highs to trigger short trades. Use 35 pip stops and pip limits.
If the 35 pip initial stop gets hit, start waiting for the next entry signal. It's fine to reenter immediately, as long as the trigger signal is seen. Close half of the position and set a breakeven stop upon a minute close with a 35 to 49 pip advantage. Set a profit-lock stop of 12 pips upon a minute close with a 50 14 to 69 pip advantage. Close the full position upon a minute close with a 70 to pip advantage.
Start waiting for the next entry signal. If the pip limit gets hit between minute periods, start waiting for the next entry signal. Do not execute a stop-and-reverse when stops are hit for losses. Live long and prosper. Well now I have been told the secrets to endless wealth in the forex market I have nothing more to worry about. And look his performance result proves it! This system was probably the easiest system to programming into charting software, 3 x 15 minute higher lows is not a very hard thing to describe to a computer.
I backed tested these systems and many others over large amounts of data on many currency pairs. Here is a sample of some of the back testing data generated by the fxtrek charts, pretty much all my long term back testing was done through them as they were the only ones to provide such a large amount of historical price data. Other charting and scripting software I worked with especially when attempting to automate systems with the trading software were VT trade and Meta trader and the e-signal service.
As regards the different charting packages, you do not need to pay for charts to trade forex, you do not need indicators and in fact if you have a firm grasp of the fundamentals you do not even need charts. They do have their uses, without the fxtrek back testing capability I might still be trading with a moving average cross.
At the end of 6 months the system had made pips profit, but at one time the system was pips in the red, not listed but from looking at the results themselves at one time the system was pips up. Using the same system with the same variables, maybe fantastic and maybe dreadful, changes a couple of the variables and you will get different results.
Sometimes the system will perform like a king other times it will get the crap kicked out of it. What changing the variables or using a different system does is just change the times at which the system wins or gets hammered. Do not get me wrong at stages I got amazing results and really thought I had cracked the formula, but the larger the sample of data used to back test the greater the inconsistency of the system.
From these test results I could see there was absolutely no certainty or consistency when it came to trading purely with indicators. If you are going to trade with indicators you will probably have more fun at the roulette table. As said before indicators do not take market sentiment into account, they cannot predict or anticipate the out come of economic data releases; they take price data and turn it into a casino type game of probabilities and randomness.
When you trade with indicators you do not ask why, you give all your powers of discretion and intuition away to your indicators; you mask the perfectly presented price chart in layer upon layer of crap. Indicators were developed for the stock market environment and contrary to the advertising of the online forex market, the forex market does not respond well to technical analysis or indicators, not at all!
It is a decentralized, over the counter market, used by millions to go about their daily business and manipulated and engineered by central banks and market makers. Much of the short term price movement is completely random, these short term, 5, 10, 15 minute prices , are often just made up and quoted to you by your broker. If you try to anticipate future price based on math calculations of recent price bars you may as well just flip a coin, or do a best of three coin flip, that has to be more consistent and is similar to the rock solid 3 x 15 minute higher lows system, which we all know by now unlocked the secret of perpetual wealth in the forex market.
So now you have read this now you know. If you want to experience this for yourself, write some systems and do some long term back testing. I am more than happy to help you with scripting although it has been a while; I still have loads of information on it. One last technical analysis method I was unable to program were divergences, I played around with these manually for a while. I can tell you they do not work either, reason being as previously said using indicators by themselves and you totally disregard all the fundamental driving forces of the forex market, and you may as well play roulette.
To help you gain a better understanding on the future price of gold, we have created both a five year and 10 year forecast on the price of gold. Gold Price Forecast For the Next 5 Years Forecasting the price of gold over the next five years will be a little easier than considering a long-range forecast. We are also seeing inflation pressures in other places in the world.
When there is inflation, the purchasing power of fiat currencies tends to go down. This causes investors to look at parking their wealth in more finite assets such as real estate, art and gold. If this inflation is not transitory, then we could see gold outperform other assets in the next five years.
In the past, the growing US debt seemed to have little to no effect on the price of gold. However, that may change if the public debt continues to grow. War Perhaps the biggest wild card is war in Europe. We have seen wars in Europe explode into World Wars. If the Russian invasion of the Ukraine persists, it could roil stock markets. In the past, wars have been very bullish for gold. Gold Price Forecast For the Next 10 Years Looking out 10 years into the future can be a little more difficult because it can be harder to predict what may happen.
Ultimately, one group buyers vs. However, the direction of the breakout depends on a range of other factors. To make the most of symmetrical triangle patterns and pennants, use them alongside other indicators like forex trading signals. Do you remember drawing a demand and supply curve, where their intersection denoted the equilibrium price? That applies to gold prices, too. Gold has positive price elasticity, as pointed out by Erb and Harvey in their paper, The Golden Dilemma.
Therefore, when there is a spike in demand, the price goes up. Demand could manifest in several forms. For example, certain industries could start demanding large quantities of gold for their on-going consumer projects. If more and more gold is being mined every day, though, should the prices not fall given the constantly increasing supply? Well, not quite. There is a good share of buyers and investors who simply do not trade gold. So, the price is ultimately at the mercy of the new supply coming out of the mines and demand from industry and consumers.
Consumer demand is also influenced by seasonality. For example, it is an age-old tradition to buy gold during the Diwali season in India. Interest Rates And Inflation Gold is strongly and inversely correlated with real interest rates.
When the real interest rate rises, gold prices take a hit, and vice versa. Note that gold has no significant correlation with the Fed funds rate or nominal yields. Intuitively enough, gold shares a positively correlated relationship with inflation. Simply put, inflation is a price increase, generally measured using a price index, for a specific basket of goods.
Inflation effectively reduces your purchasing power. For example, the US witnessed high inflation in the latter part of the 70s and early 80s. During these years, the gold price shot up. However, there was also a short-lived inflationary period in the late 80s, during which the gold prices declined.
In conclusion, the price of gold has historically risen during periods of severe inflation. However, a short episode of mild inflation may not cause the price of gold to rise significantly. Nevertheless, it does make sense to be bullish on gold during a period of rising inflation, and bearish during a period of declining inflation.
Gold Buying by Central Bank We discussed earlier how gold works as a hedge for times when volatility grips markets and economies. To counter such adverse fluctuations, central banks often buy gold and hedge themselves against the volatility-led risks. But this is not the only reason why central banks go on a gold buying spree. There are 3 primary reasons why central banks buy large amounts of gold: A safe haven and a hedge against USD and other fiat currencies The most striking feature of gold is its ability to sustain purchasing power, even when markets are panicking.
It is a safe haven that preserves value and even generates profits during times of volatility and uncertainty. Negate the effects of inflation While many tend to see inflation as an unfavorable scenario, that's not entirely true. Some degree of inflation is healthy.
Too much inflation or deflation, though, are very real problems. When you see the value of gold rise, know that this is suggestive of currencies being devalued. Consider investing in gold using: 1. You may trade gold options or futures through a major, regulated exchange.
These securities are connected to physical gold. The smallest contracts for gold futures are linked to 33 ounces, and margin requirements are tough. A gold futures contract is not an option for small-scale investors.
The price of stocks moves in line with the value of gold. Trading requires registering accounts with brokers that offer direct access to the stock exchange. There are commissions or spreads. Capital requirements for trading gold are outrageous.
Leverage is capped at 2 to 1. Forex Brokers One does not need to buy physical metal to invest in it. You can trade gold on forex like any currency. A regulated broker will be your guide, and you can execute all trades online through a cutting-edge platform. Such systems provide access to news, indicators, charts, and gold Forex trading strategies so you can make measured decisions about your investment. You can program the terminal to receive Forex gold trading signals automatically.
Read articles, and take advantage of other educational resources and support for aspiring investors. Open a demo account to learn and start trade on forex at your own pace. You can gain experience in fundamental analysis and technical analysis quickly. There are many reasons to trade gold today. To build your trading strategy, consider these tips and tricks.
Forex gold trading is done 23 hours a day, 5 days a week. For those looking for a safe haven, a liquid asset with relatively low volatility, active trading during peak hours is advisable. If you want a bit more volatility, trade gold after the session closes. This allows execution of scalping strategies.
Remember that risks in daily trading also rise. Look at Highs and Lows The pairing used in gold Forex trading tends to move in a range, not as a trend. There is no need for complex trading strategies for trending markets. Just focus on previous highs and lows to open positions in gold Forex trading.
You may open a long position when the gold price is going up, and use the previous high as the bid price of gold. This style of trading gold works because the metal is likely to return to those highs and lows in the future. Naturally, this may take time, so this system is hardly applicable to day trading. A ranging gold market does not offer opportunities for quick profits.
Still, your risk is only moderate if you trade gold this way. Consider Fundamentals Currencies are susceptible to political or economic changes. In times of uncertainty, fundamental factors may cause extreme volatility, so instruments are difficult to trade.
Meanwhile, commodities like crude oil are affected by supply and diplomatic tensions. Meanwhile, gold Forex trading remains a stable safe haven. The yellow metal is correlated with the American currency, as well as the Japanese yen. Use the Symmetrical Triangle for Analysis This is a plain type of chart patterns on trading platforms. It helps you identify breakouts. Combine it with technical indicators like liquidity or the relative strength index for effective Forex gold trading.
When these also point to a potential breakout, you have more confidence in your position. Place stop loss under the descending trend line following the convergence. Once the price of gold breaks out of the range, start shorting. Monitor Demand When the market demand rises, so does the price. The former may be driven by different industries that need gold to manufacture products — e. Demand analysis is important for Forex gold trading.
Monitor Actions of Central Bank The policy of the central bank is key for financial regulation in a country. When it anticipates greater volatility in the market, it buys gold as assets for hedge.