Always wanted to start trading? Gold is a great place to start since:
- Gold is easy to understand, you don’t have to worry about dividends, coupons, stock splits, and so on, unlike other financial instruments.
- Gold is a tangible asset that you can hold.
- Gold is an inflation hedge, which we’ll take about later in more detail.
- Gold provides competitive returns compared to other assets.
- And so on…
However, before you can start trading gold, we want to make sure that you have the appropriate knowledge and skills to master the markets!
Before diving in, let's get the basic terminology out of the way!
- Troy Ounce — This is the traditional unit used to price precious metals. To make matters more confusing, a troy ounce is different to an ounce since 1 oz = 31.1034768 g. Now, when you see that the gold price is 1800 $/oz, you know exactly how much gold youare buying. If you want to know how much one gram is worth, you can easily make the conversion by doing 1800 / 31.1034768 = $57.87.
- Margin — This is an important concept to understand. When you buy gold, you can buy it in full. Meaning that if I buy 1 oz, I pay the full $1800. So, there is no leverage. If you don’t have the full $1800, you have to get introduced to the concept of margin. This is most easily explained with an example. Let’s say you want to buy 1 oz of gold, but you only have $180 on your account. This is 10% of the total amount, meaning you have a 10% margin. If the price of gold goes down to $1700, you now have $80 margin remaining, since your position lost $100. But on the other hand, if the price goes to $1900, you now have $280, meaning you almost doubled your initial investment!
- Spot — This is the most common way to buy gold. It just means that you buy gold at the current price. We won’t dive into it now, but you can also buy at the future price, which is an agreement to buy gold at some point in the future.
- Bid/Ask — The bid price is the best price that you can sell at and the ask price is the best price you can buy at. The difference between the bid and ask is often called the spread. One advantage of trading gold is that it is a very liquid asset, so you get a small spread. If you trade less liquid assets, the spread will be bigger and therefore it will be more costly to trade.
- Market Order (MKT) — A market order is an order to buy or sell gold at the current price. It is like walking into a store and saying you buy gold now.
- Limit Order (LMT) — Sometimes you don’t want to buy at the current price. Instead, let’s say the price is $1800, you only want to buy if there is a crash to $1700. You can place a limit order saying that if the price reaches a certain level, buy or sell. This sometimes allows you to buy gold at the price you think it is worth. The order will then get executed at the price, even if you’re sleeping.
- Long/Short — Another concept that you’ll hear often is being long or short. People in finance like to make things more complex than they really are by making up lots of words, which is why we’re covering the bare minimum. But being long just means buying gold. So, you’ll be happy if the price goes up. Being short means that you borrow the asset, sell it, and buy it back after a while. So, if the price goes down, you’ll be happy since you’ll be able to buy it back cheaper.
Now that you know the basic terminology, we can actually get started with trading! If you already have a 24Gold account, go ahead to our trading platform. If not, sign up and we’ll get you up and running in no time.
Once you’re logged in, you should see something like below.
The entire platform is divided up into different widgets. Let’s slowly go over the most important ones to get up and running.
The top left corner contains the trading widget, where you can buy or sell gold (AU) or silver (AG). You can see that by default we’re placing a market order, but you could also place limit orders by clicking on LMT. Next, you can easily say how much gold you want to buy or sell and add a comment if you would like.
Next, we have the margin widget, where you can monitor your position. This consists of several different fields, let’s go over the most important ones.
- Net Equity — This is the real time USD value of the account. If you sell all of your positions, this is what you would remain with. It is the sum of the total funds and the revaluation.
- Revaluation — This is the value of all current open positions. For example if you are long, then this balance will be positive. If you are short, this balance will be negative. In this case, I have 1 oz of gold, which is worth around $1866.
- Total Funds — This is how much money you need to deposit to get all of your gold. For example, if I buy 2 oz of gold, I will have a revaluation of around $3600. But if I only have $2500 on my account, I’ll need to add another $1100, which means the total funds will be -$1100. Once I do deposit the $1100, I’ll be able to take delivery of my physical gold!
- Quantity — This shows the total amount of gold or silver you have in grams.
Knowing these basics, you can now start trading gold! We have a more detailed user guide on our website, which dives into all different aspects of the platform.
Now that you’re familiar with how to trade, we’ll start going over some trading strategies in our next blog, so watch out for it!
