hello friends and welcome back to another trading video my name is nick and in today's video we are talking gold now gold is one of the most popular markets to trade and i'm gonna try and do my best here to give you guys as the title proclaims the ultimate guide to trading gold entries exits strategies approaches things to consider this is going to be your go-to source hopefully on gold now if you enjoy this video do me a favor and smash that like button down below subscribe if you're new for more trading tips and let's get right into this thing okay so uh what is gold and why should we trade it well gold is something that is a very old metal it is well a very old currency if you will obviously it's an old metal but gold itself is something that has been used throughout human history as some sort of uh store of wealth or it's one of the oldest probably the oldest currency or one of them to be used in on our planet popularity uh here's some reasons to think about trading gold obviously it is very popular it has a lot of volatility it can really really move you can make and lose money very quickly on gold which you know remember that you can lose money very very quickly we're going to talk about that more uh some fantastic trends unfold on gold and it's a very emotional asset we're gonna talk more about that as we get along but just know that gold tends to uh during like big events or cataclysmic events in the world gold can get very very pushed to the front center people buy gold when they're fearful people sell gold when they are not so fearful so that's something to consider if you're going to be trading gold so let's keep going so most effective strategies now this is not something i'm going to be able to do in one single slide but this is the idea that we're going to be trying to think of if we're going to be trading gold what's the best approach should we buy low sell high as you know the simplistic version of trading that everyone sort of uh knows the saying buy low sell high uh or should we just follow trends which should we be contrarian should we go against the trend let's talk all about it so let me just show you guys a few things first look at that handsome fellow on the left by the way we did a photo shoot in the office and uh they turned out pretty good so lily who helped me create this presentation she decided to put him in the the slideshow i think i think that guy looks really good on the left all right so the weekly chart check out some of these insane trends over on the right side you can see a massive bull rally that we we had basically throughout uh 2019 going into 2020 and even uh well we gave back a little bit in 2021 but mostly 2020 was just an absolute huge year for gold but there also are times where things go the other way and we need to be aware of this because if you're just getting into trading or investing if you've been looking at this stuff in the last year or so for the first time you might just think oh gold is just something that goes straight up but it definitely does not always do so here's a trend from 2012 to all the way down into 2016 where gold was pretty much making lower lows and lower highs so please be aware trends can go either way for gold and they can be very very strong now we're going to talk more about that because there might be some strategies that we can implement with that so stay tuned okay um i want to show you guys really quick just one trade that we took inside of the group this is frank you can see he's a very stoic kind of guy he took a trade on gold back in april sort of a contrarian trade sort of against the trend but uh more with the fundamentals and long-term perspective here's his trade he bought gold at 17-18 which is actually quite a while ago back in the price now if you look at it at the time of making this video um he basically took a technical trade off of the lows and ended up holding on to it for quite some time and just goes to goes to show back to these slides you know if those trends if you're able to ride them they're fantastic whether it's a buy or a sell if you're in a trade on gold and it really does its thing it can be a fantastic fantastic way to capture some great profits so again frank uh trades inside of the group for us he's one of our analysts here at a1 trading and he caught some great trades on gold i wish i had those myself but i just wanted to point that out because i thought it was cool so uh let's talk about some facts because if you're going to be trading gold before we go placing positions and talking about entries and exits you need to know some things it's going to be very important that you if you're going to be trading something if you're going to put your money in something you should understand what it is that you're doing and some things about the thing you're trading so as i mentioned earlier gold has been used as a currency for literally thousands of years it's been used in coins you know the roman empire you know you've had all these different empires that have used gold as some form of currency some store value and don't you know don't ask me why because it's no it's above me obviously humans love gold for some reason and i think that that is probably set to continue into the future now it is also one of the most traded assets in the world out of all the different markets that you can trade gold is very popular everybody you know looks to the gold market similar to like the bond market and you know obviously the forex market all these markets are uh you know traded for a big big a big amount of money every single day and gold is not exempt from that there is a lot of volume that goes through gold as people trade gold as hedge funds trade gold as people invest in gold long term uh you may have heard that gold has been used in the past as a hedge against inflation stay tuned on that we're going to talk about that as we go along in this but there are multiple ways to actually trade and invest in gold now many of you guys who are forex traders or currency traders you may know of the pair xau usd that is one way to trade it but you can also buy physical gold some people like to to buy physical gold which has its pros and cons you can buy etfs or exchange traded funds on the stock market i know in the us i'm not sure about other places but i ventured a guest but you probably can as well um by the way for stock traders out there that is gld that is an a etf that you can buy that basically tracks the price of gold uh and then you of course like i said you can trade it on forex or you can uh the foreign exchange so some first things first if you're gonna be trading it here's some more things we need to know you can't really trade gold without actually understanding the us dollar and they have they're like they're like cousins that are fighting they're very very important to you can't isolate one and not even think about the other uh because they trade relative to one another and in fact gold really watches what's going on in the u. s quite a bit from the studies that i've done on it the goal so gold is oftentimes affected by the us dollar in an inverse way so for what i mean by inverse way by the way is when we see gold strengthening the u. s dollar is weakening and we see gold weakening when the us dollar is strengthening now this is not always the case it's not a hundred percent accurate because there are times when the u.
s dollar and gold can both go up but this is something that we see often enough to mention uh gold is often also viewed as a safe haven investment i mentioned that earlier on in the video but i talked about the fact that sometimes it is used as a hedge against inflation so inflationary concerns around the world which by the way is something that we're going through right now with the us dollar um you know has been actually a bullish catalyst for gold in here in 2021 where we start to see some good run-ups for gold uh it is something that people tend to do is they they buy into gold when inflation is a concern so again these are factors that we have to consider if we're going to be trading it now let's talk about the correlation to the u. s dollar uh so obviously you can see i'm pretty excited about this on the right side of the screen but the idea here is at the bottom of the the window there i know there's a lot going on but you've got up top actually you've got gold in what is that gold is in orange and then the us dollar is in blue now what you'll notice is that there is a general tendency here on this chart for them to be doing the opposite you'll see periods of time where the u. s dollar is going up gold is going down where times where gold is going up and the us dollar is going down you can also see it down at the bottom of the screen i've added a currency correlation or sorry a correlation efficient factor on tradingview.
com i applied that to see what that looked like and you can actually see that you've got gold uh and the u. s dollar sort of negatively correlated now it's not always the case but you can see that that correlation at the bottom of the screen is heavy weighted on the bottom side of the of the x-axis if you will what that's telling us is that usually they move inversely there are spikes where that changes you can see little blips above the horizontal axis where you can see prices or not price but where the the correlation sort of breaks down and it you know goes back the other way but for the most part there's a tendency here from what we can see seems like there's a heavy bias towards inverse correlation meaning when the us dollar is strengthening gold is weakening when the us dollar is weakening gold is strengthening so that is something to definitely pay attention to again we can't look at just one without the the other in my opinion you've got to see what's going on with the us dollar if i'm going to be trading gold and vice versa okay so i've touched on this briefly but gold is traditionally viewed as a risk off investment and by the way you guys we are going to get to the technicals but this is the stuff that if you're making it this far into this video uh drop a comment down below tell me you made it pretty far in the video mean a lot to me um just because this is the stuff that's a little bit not as exciting as you know moving averages and price action but this is stuff that really really matters if you're going to take this stuff seriously so gold is traditionally viewed as a risk off investment this means traders historically buy gold in times of uncertainty time periods like 2008 through 2010 when the whole world was like terrified of massive you know massive stock market crashes that would keep going which there was a massive stock market and yet gold did fantastic during that time this also means that traders tend to sell gold in times when risk appetite increases now this is not always the case but usually we see some form of increase sorry decrease in gold when stocks and other riskier investments are actually doing really well the result is that gold tends to under perform more aggressive growth assets in optimistic market environments and fares uh better in times of uncertainty so the idea is basically they're sort of also inversely correlated to high-risk assets versus low-risk assets so you have things like gold which is sort of a stable you know it's like a place where you invest where if you're just looking to get you know a slow and steady return but it is you know usually sold off when things are really optimistic because people are like i'd rather sell my gold and go put it in a stock where i could get you know 10 a year 15 this is stuff that drives the price higher or lower for prolonged periods of time okay so in order to take uh trades on gold i personally look at a few factors um so now we're getting into the actual execution and i know it's what everybody wants to hear because obviously it gets more exciting from here it's more talking about trade setups and things like that but in order to take trades on gold there are a few factors that i have to see before taking any positions first i build a directional bias based on mostly fundamentals and sentiment analysis okay so this is not technicals it's not even looking at the chart yet this is just what we've talked to leading up to this point before i even take a trade i pick a direction through fundamental and sentiment analysis so let's look at what i mean by that let's start with sentiment analysis so the first thing i like to do is consider sentiment analysis what is the cot report looking like if you don't know what i mean by that if you don't know what the cot report is i will link a video on that subject down below in the description might be helpful to you if you don't know what ct reports is but it's basically tracking institutional money what they're doing with their positions and also what is retail sentiment looking like both of these things are are components of my sentiment analysis steps that i take during any trade setup that i'm taking essentially not even just on gold but just in general so let's look at the cot report for example an increase in institutional buying is something that has made me bullish on gold especially at the times of making this video we've seen a nice increase there you can see the red arrow increasing as demand for gold from institutional traders has increased now i'm not going to spend a ton of time on explaining all this like i said i've got a video all about cot reports if you don't know about them but you can see the non-commercial is what i care about i care about what the the big leverage funds and hedge funds institutional traders are up to in markets and so if they're increasing their positions on gold that's a positive sentiment for me on gold from traders who more or less know more than the average person for sure right well i guess some of them might not be as smart as as they claim but for the most part you can probably trust if they're managing millions and millions and billions of dollars that they they're not as dumb as the average trader but uh so you know a positive increase in sentiment there is is kind of a positive now opposite effect on sentiment data i know it's a little bit confusing as the nice little fellow there on the right seems to be a bit confused but sentiment date is the opposite so if the retail crowd is super bullish on gold then i'm a little bit more hesitant to be bullish myself in markets it does not pay to be chasing with the crowd right have you guys ever heard of the concept of fomo or fear of missing out right same kind of concept i don't really like to be chasing prices or trying to fight strong trans i'd much prefer to probably be in the minority when it comes to sentiment from retail traders where you can find stuff like this on sites like dailyfx you can find this on myfxbook. com there's sentiment analysis reports you can also find it even on our website we've made a tab at a1trading.
com you can look at sentiment data oh also and cot data on our website anytime you want so check that out a1trading. com you can probably find it down below in the description as well okay fundamental analysis here's a lot this is a lot on the screen and for the traders who are who are not very serious maybe just want to skip this stuff but for the people who are very serious this stuff matters to me it's important stuff so let's look at this if i'm going to be taking a trade i want to know fundamentally do i have the wind in my sail or am i just going against the tide here so here's what i've got some key things is inflation on the rise in the u. s if inflation is on the rise if that's a yes it could actually be good for gold and weak for the dollar high inflation and rising inflation um it's sort of thing like if we know that there's high inflation right it's it's it's tricky because there's multiple factors high inflation could lead the fed to raise rates but right now what we're seeing for example in the last few months we've seen inflation on the rise but the fed not wanting to raise rates that's the second tab there is the fed actively looking to raise rates if yes that's potentially bearish for gold so i'll take a real real world example right now right now we see high inflation and the fed not wanting to raise rates those two things combined are very positive for gold because raising rates like i said that's bearish for gold because a higher rate means the u.
s dollar will likely strengthen and a strengthening dollar remember is likely not good for gold right gold flourishes does really well when people don't want to hold traditional fiat currencies like the us dollar is the outlook for the us dollar bullish that's our third tab there if yes could be bearish for gold because if the dollar strengthening like i just said it's usually not the best thing for gold because gold like i said it does better when the other options don't look so good is global outlook positive or negative if it's positive it's not so good for gold remember we said gold does really well when everybody is super concerned about the outlook of the world global economy us economy etc people flock to gold as sort of a safe haven but when you have the opposite effect when outlook is really positive it's not so good for gold usually people will sell out of their gold in favor of other more risky assets okay now we get into it we are what 16 minutes into the video if you made it here you've made it to the part that everyone wants to see which is the technical analysis segment and it's honestly the least important in my opinion so far yes technicals matter don't get me wrong but the other stuff really matters too and you've probably heard a lot of the technical stuff but you probably have not heard so much of the fundamentals here on youtube if you have then you're probably a step ahead of the rest and awesome for you but i did not learn the fundamental stuff until a lot longer into my journey as a trader and it was really really impactful and really helped me out so um you know definitely definitely pay attention to all of it technicals included so technical analysis after i've established my directional bias like we just got done talking about after i do my research do my homework on gold i'm using technicals to actually assist with the entries and the exits when trading gold okay so i find the direction first uh and then you know i make it i make a prediction or a a directional bias that i have and then i actually look to enter and exit using technicals and for me if you know my style of trading i am a pullback trader i like to trade trends i like to go with the flow so i'm typically using my standard approach so if you've seen that you probably know a lot of some of the things i'm about to say pullbacks in a strong up or down trend is basically my favorite strategy letting winners run etc hey there's miles miles is our editor and producer here at a1 trading he made it into the show shout out to miles there so yeah here's an example of a great trade setup you can see miles rubbing his hands together because this thing is beautiful so basically we've got a dominant uptrend got the trend line drawn everything's looking good and the idea here is in the green zone there you've got support right very very simple concept things are looking good and this is assuming that we had picked a bullish direction for gold we're going with the flow the moving averages line up everything looks good and i'm just looking for a technical retest of a support zone um and i know this is fairly simple this is fairly straightforward i don't have anything you know secret secretive or magical for you in terms of technical analysis i keep things very simple i like supply and demand i like you know just going with trends uh using moving averages is a simple filter for direction i like the 200 moving average by the way and so here's a downtrend example i don't know why i'm so confused on this one because this one's pretty clean but uh you can see moving averages look beautiful things are trending to the downside very nicely and for whatever reason you know had i picked the right uh general bias and direction i'd probably be looking to short this thing and so a nice retest of resistance great trigger to go short and looking for something that gives me a nice positive risk reward i'm not sure if that's on the slideshow but it is important uh that i mention when i'm going for trades on gold i love the idea of trading trends and letting winners really really run so let's see uh so let's see if it's in there or not yeah it actually is so cool technicals i look for in summary i like to look for the higher time frame trends to help uh you know just guide my entries i am more of a swing trader so i'm liking i'm liking the big moves there i also like moving averages as i mentioned looking for directional uh confluence with multiple moving averages pointing in the same direction big ones that i like are you know not that you know the moving averages aren't magical or anything i like the 100 the 200 and the 50. uh just for directional bias i'll plot them on my chart just to see you know are things looking smooth are they really choppy and indecisive etc um the next one is supply and demand support resistance keeping things very very simple here i don't have you know magical ways of doing it i think it's the simpler the better for me i just like to find areas where there was key pivotal spots i call them you know v movements where you see a price shoot up and then shoot right back down or vice versa shoot down shoot right back up i like fibonacci tools uh they're not my favorite like it's not like i'm gonna make it or break it but i do like to see when a nice fib level lines up with a level that i like that's always added confluence and name of the game for me is pullbacks and finally probably the most important one on this list is if you catch a winner the way i like to play it if i catch a winner i'm holding on to that thing for dear life to try and hold on so that i can see if it captures a huge move on gold sometimes this can be this can be confusing can be annoying for new traders when they jump into a winning trade and they uh they see it go in their direction just to pull back and and stop them out but for me the name of the game is endure those times where it's annoying and you have to get stopped out in order to catch the occasional massive runner like we saw in these examples so letting those winners run i like to trail stops i've got videos on that subject specifically as well so those things are all components to how i like to trade gold now the next is risk management risk management is very very important on gold because let me just take a moment to really cut through to the new traders out there in the audience gold is almost certainly from my experience it's probably the number one account blower for new traders people who just get into this stuff they think oh trading gold sounds cool you know it's a shiny metal and you know i'm gonna be rich trading this thing and uh please no it is seriously it is quite volatile uh and if you're trading with margin which most of us are probably are if you're trading 4x most brokers offer you some form of margin whether it be 50 to 100 to one whatever right if you're not careful it can very easily create massive losses sure it can also create wins but again if we're not gambling here we're not trying to be like going to casino just having fun we're trying to trade successfully we don't want to have massive losses we don't have one have massive you know i guess massive wins or nice but we want to take trades regardless that almost never if not never result in massive larges we want to take small losses if we're going to take them and if we have a great big winner that's fantastic but we don't want to have trades that end in just catastrophe if you will next thing is you must have a plan to control your risk if you don't have a risk management plan if you don't even have a trading plan you definitely should not trade gold because gold is not for the faint of heart it is not an easy thing to trade it is aggressive it is highly emotional like we talked about earlier and can cause like i said a lot of trouble for new traders who don't know what they're doing yet uh so next ideally i'd like to risk one percent or less on a single trade and this is where you know i'm going to butt some heads with people because a lot of people say like i want to trade gold on 100 account personally i think you need at least 500 in an account to open even a 0. 01 lot size position on gold due to the contract size so because of how many pips gold moves even a 0.
01 lot size is actually quite volatile and it's really difficult to actually risk one percent or less because you know just because you're getting in the spread is so quick to move quite a bit and it's gonna be very hard to risk one percent or less if you are operating on less than five hundred dollars i i'm not the best at explaining mathematically what i'm trying to say but the basic idea is that if you have less than 500 just the spread alone almost costs you like one percent in some cases depending on the broker you're at you know it's it's if you're working with 50 bucks or 100 bucks in an account it's almost impossible to properly risk your or manage your risk here so very very important you know don't trade it on a tiny account and look to get rich it's a very quick quick way to the poor house um if you're going to be trading it you'll need to make sure like i said you have proper risk management plan uh i go more in depth oh yeah so i've got a video that i put in here to make sure to remind you guys i go more in depth on that concept in my risk management tutorial which i'll also link below okay final thoughts from the handsome gentleman there on the right like all markets consider making sure that if you have uh you know a back-tested plan that's gonna help you a lot if you have a risk management plan that's gonna help you a lot and finally an entry and exit plan i told you guys how i like to enter and exit uh you know i like looking for pullbacks you know retests stuff like that but i would highly encourage you whatever plan whatever strategy you think you have definitely go test it go back in data you know you can do you can do all sorts of back testing i've got videos on that as well if you need help with that specifically and please remember please be careful don't be stupid with your money um you know make sure to also demo test and continue to do more research like i'm still learning things about gold and i've been trading for five five years almost six years now so uh you know there's always more to learn and don't think that you know everything about it because it's a dangerous way to lose a lot of money also all the tools that i showed you guys the cot reports things like that that i mentioned the site we've got tons of resources for free for you to check out on the website a1trading.
