As far as the fundamental principle behind the trading of gold is concerned, it is due to the continuous change in the perception of gold as the ultimate store of value. After all, there is a finite amount of gold in this world and people believe in its value.
This is the reason that people invest in gold during economic downturn. During the European debt crisis that lasted from 2010 – 2012, there was a lot of money spent for buying gold and consequently, it led to a huge rise in the price of gold. The perception of gold as the ultimate store of value has been there for centuries and it is not going to change soon.
Gold Trading in Binary Options
There are a number of assets being traded in the binary options market and gold is a popular asset as far as commodities are concerned. The binary options markets provide retail traders a much less stressful and a lot cheaper way of trading this community. In the futures market, a retail investor not only needs a lot of trading capital but also high leverage and that makes trading a costly affair.
In other words, most of the retail traders cannot afford to trade in the futures market. After all, a retail trader will be required to deposit up to $20,000 for trading in the gold futures market and then lose all the money with just a few trades. In the binary options market, a retail investor can start trading gold with just $500.
Almost all the binary option brokers offer trading in gold on their platform. One does not need to worry about the contract size, margin or leverage. 100 troy ounces is the size of a typical gold contract as far as the futures market is concerned. In other words, a trader has to buy at least this much contract for gold in the futures market.
The price of the futures contract is determined by the cost of gold at that moment. For instance, if the gold has a cost of $1500 per troy ounce, the contract is going to cost $150,000. There is a leverage 1 to 20 in the futures market which means that the trader will need to spend $7500 for trading a single futures contract.
On the other hand, traders need to pay only a minimum of $25 for trading gold in the binary options market. The trading amount that can be upped as the trader gains experience. The payouts are also much higher in the binary options market as a single trade can lead to a profit of around 80% which means that a binary options trader can make up to $800 profit on trading gold with just $1000.
A trader needs just four such trades for a monthly return of $3200 on gold trading. In other words, binary options market allow traders to make huge profits that are similar to future traders but at a lesser risk and lesser cost.
Gold Trading Process in the Binary Options Market
First of all, trader is required to open a broker account with one of the binary option brokers that also offer gold as an underlying asset for trading. Once the trader has filled up the online account opening form, he or she will also be required to provide a proof of address and a proof of identity. The identity proof can be in the form of international passport or national ID card whereas the address proof can be in the form of a bank account statement or a utility bill.
After account activation, the trader can begin gold trading on fundamental basis as well as technical basis. Here is an example of technical trading made on underlying gold asset using various technical charts.
Gold Trading Chart
The above chart shows the value of gold in a trading pattern. The chart, which shows a downside bias in a symmetrical triangle, can be used by the trader to wait for some time until the underlying asset moves beyond one of the trend lines. In this case, it is the lower trend line. Since this is a daily chart, the trade can be expected by the trader to last for some time. Therefore, a PUT trade with an expiry of around 48 hours should be profitable for the trader.
In the binary options market, traders are more likely to find trading opportunities using the technical trading setups (shown above) as compared to the fundamental trade setup.