5 Tips for Trading Gold with Bitcoin in 2020
You can use bitcoin to trade Gold on TradeConnect, but do you know enough about the precious metal to get started trading? We take a quick look at 5 tips to trade gold in 2020.
Gold continues to grow in popularity and has positioned itself as a reliable market for traders concerned about putting their money into often less reliable assets.
For some, Gold has become a hedge against other investments, for others a safe haven which continues to remain resistant to the dramatic swings in value that you see in other more volatile markets. As per crypto markets, successful gold trading is best achieved through a strong understanding of both fundamental and technical analysis.
There are countless ways to trade Gold using bitcoin as your margin collateral and many of these tips will be familiar to crypto traders. Remember, this should not be construed as trading or investment advice. Each individual trader must decide what works for them in their personal trading situation.
So let’s take a look at 5 tips for trading gold using bitcoin as your margin collateral
1. Look for cycles in the market
Nearly all markets have turning points and cycles that help you make decisions in both the short and long term and Gold is no different. When trading Gold, keep an eye out for business cycles that affect the Gold Market as it can often struggle during economic booms whilst it has also been known to rally through recessions. This is mostly related to the fact that Gold is often treated as a safe haven asset. With that said, business cycles are never the same so look out for trading waves in history and utilise this knowledge as a component of your overall Gold trading strategy.
2. Monitor the buying of gold by the Central Bank
A good indicator of positive or negative sentiment can often be the purchasing of Gold by Central banks who often buy Gold as a hedge when they are anticipating volatility in certain currencies.
A recent example includes Russia who recently made significant investments in Gold, which reflected their concern about the future price of the US dollar and the Euro.
3. Keep aware of long term trends even if you trade short term
Gold has been regarded as money for over 2000 years and, more recently, has appreciated considerably since the seventies. As a trader, thinking long term keeps you focused on the bigger picture and doesn’t let you lose momentum when the market hits its natural speed bumps. Thinking about a market in the long term also lets you tie in life cycles into your strategy such as retirements. Finally, thinking long term allows you to focus on the history of the markets and not get too caught up by the news speculating on quarterly earnings or daily events.
4. Maintain a contrarian outlook
Contrarian trading strategies are more nuanced than just buying on a rumour and selling on the news. Some of the best trades in history were as a result of traders going against market trends. Contrarian trading is about understanding positive and negative sentiment, human psychology and herd mentality. It’s about having a strong sense of timing, judgement as well as both technical and fundamental analysis and having an innate ability to recognise a turning trend before it is released on the market.
5. Remember gold is a hybrid asset — part Currency, part commodity
Like all assets, Gold has its own important trends that you must understand in order to be a savvy Gold trader, when you first start to trade Gold, it is important that you understand the fundamentals of commodity trading — Where Gold comes from, how Gold is priced and what factors impact the pricing of Gold around the world. For example, did you know that Gold is one of the most widely traded raw materials in the world along with Crude Oil? Are you aware that over the past few years Gold mining has not seen any huge shifts in activity or that whilst Gold remains in high demand, the industry is experiencing much higher costs to extract Gold from the earth? At the same, are you aware of how this hybrid asset moves against local currencies such as the US dollar?
You can get started in our beginner’s guide to commodity trading and our beginner’s guide to forex trading if you want to start learning more about the fascinating worlds of trading commodities and forex.
In summary…
Whilst the price of Gold is affected by a number of different complex factors, there are still many strategies that you can use when trading gold to help you enter and exit the market with a successful outcome and these are only five to get you started and on track to a healthy portfolio.
