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Thursday, August 13, 2020 / 05:00 PM / Sponsored Post / Steven Copeland / Header Image Credit: fxempire
Precious
metals like gold and silver are classified as commodities. This means their
price is set by the market regardless of producers. Humans have been trading
such goods for centuries. Today, it is possible to do it online - all you need
is a device with Internet access.
Gold
and silver are traded via different securities. They are highly liquid, so
buyers and sellers have no difficulty in connecting. The range of opportunities
includes spot trading, CFDs, options, futures, or funds, including ETFs. The
first two options are easily accessible in Nigeria. Here are their fundamentals.
Like
any trading model, the system is based on exchange. Spot metals (gold or silver)
are traded against a currency. The most popular pairings include Gold against
the US dollar (XAU/USD) and Silver against the US dollar (XAG/USD).
Precious
metals have an important advantage over other assets. They are less susceptible
to volatility, which means prices are more stable and predictable. They are
also liquid worldwide and protected against inflation. Gold is valuable in any
country, so finding a counterparty for a trade is easy.
Currency
pairs have one major flaw - they react to a multitude of political and economic
factors. In this regard, spot metals trading is less complicated. You do not
have to monitor two economies at once.
Brokers
enable clients to trade with larger volumes than their deposits allow. This
means that your provider will add a share of their funds to increase your
buying capacity and potential returns. While the arrangement is surely
attractive, there is a catch. The risk grows along with potential profits, so
leverage must be used with caution. Gain knowledge and experience before
opening boosted trades.
Spread
is the difference between the price for the buyer (Ask) and the price for the
seller (Bid). Top brokerage firms offer tight spreads. These may start from 0.1 - 0.5 depending on account type. Clients should study pricing rules, along with
opportunities for limit/stop levels.
The
market for spot metals trading is awake 24/7. This means you are free to open
and close your positions around the clock. In this regard, it is not different
from the currency exchange.
Spot
gold and silver have no expiry dates. This means that a position will stay open
until you close it intentionally. The only condition is that the margin is
maintained.
Spot
metal trading may be done through platforms and apps such as MetaTrader 5.
These are comprehensive environments suitable for a diverse range of assets.
They provide instant access to relevant market data.
Traders of silver and gold need to keep an eye on corresponding price charts. Both short- and long-term trends should be identified and assessed. Traders may open long or short positions depending on their projections. Large brokerage brands such as FXTM provide ample guidance on the subject of metal trading in Africa.
The
second way to profit from metals is via Contracts
for Difference (CFDs). These are virtual derivatives tied to an
underlying asset (in this case, gold or silver). As the price for the metal
changes, so does the value of CFDs. These instruments may be connected to a
wide range of assets: stocks, cryptocurrencies, etc.
Each
CFD is a virtual contract with your broker. The subject of this agreement is
the price for a certain precious metal. CFDs are traded in accordance with
basic Forex logic: both long and short positions are allowed, and any kind of
trends may be profitable.
Never
put all eggs in one basket. In application to trading, this saying refers to
diverse portfolios. Traders who rely on a single asset expose themselves to
higher risk. Aim to develop a varied set of instruments: e.g., currencies,
stocks, derivatives, and spot metals. The more options - the better, as long as
you understand how they work.
Make
spot metals and CFDs parts of your diverse portfolio. This way, when one asset
brings a loss, it may be neutralized by profits elsewhere. Diversification is
key to long-term gains.
Gold
and silver have been used for centuries. Wherever you travel, these metals are
in demand. As their value changes, this opens special trading opportunities.
Now, it is not necessary to own physical metals. Through modern software,
anyone can capitalize on rises and falls via spot metal trading or CFDs.
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