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.

What Spot Trading Means

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.

Trading on Margin (Leverage)

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.

Competitive Spreads on Metals

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.

Convenient Hours for Trading

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.

Absence of Expiry Dates

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.

Trend Analysis: Key Tips

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.

CFDs on Precious Metals

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.

Benefits of Diversification

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.

Assets of Timeless Value

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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