Gold has been traded and used as money since ancient times. In the age of electronic trading, nothing has changed—gold continues to be a heavily-traded commodity and not just because it’s shiny and pretty.
For individual traders, gold is not just about keeping coins in a closet safe or deposit box anymore. Some traders have gotten into trading short-term trends in the gold futures market and more recently, gold ETFs. Those ways of trading work for some people, but as with all commodity trading, you face
- relatively high margins
- the possibility of unexpected losses
- margin calls
- the need to use stop-loss orders to manage risk
Why Traders and Investors Still Love Gold
Why is old-fashioned gold still such a popular financial asset? Safety, liquidity, and return on investment. Much of the world values gold as a stable form of capital and in has deep cultural roots in many countries.
Two of the largest emerging markets, India and China, have special affinity for gold over other precious metals. In fact, the spring wedding season in India sees so much buying of gold jewelry that it is a major event for gold traders in the banking and financial sector.
In fact, while you and I might think of gold for wedding rings and fashion bling, bankers and fund managers think of it alongside bonds and currencies. For years, central banks offered low and even negative interest rates on their bonds. Compared to low-return US Treasury or other government bonds, gold has offered a higher average annual return since 1997.
Forex trading and gold trading go together
Forex traders also keep gold on their radar. Since the end of World War 2, the US dollar has been the main reserve currency of the world. But in the last couple decades, the dollar’s share of global foreign exchange reserves has gone down as central banks diversify into euros, yen, and the Chinese RMB. Those banks have also diversified into gold.
Some savvy forex traders have followed suit, trading currency pairs and gold side-by-side and even using gold to hedge against volatility. On Nadex, you can trade gold and forex from the same account.
Day Trading Gold on Nadex is Different
Nadex binary options and option spreads offer an affordable way to try a variety of gold trading strategies and add them to your portfolio. You can trend trade gold itself or trade it along with trades in stock index futures or forex. You can trade 29 different markets from one account.
On Nadex, you choose your maximum profit and loss up front, before you place the trade. You don’t have to worry about unexpected losses or margin calls, as you may find in other kinds of commodity trading. And you get risk management without needing to set a stop-loss.