Investors all around the world are fascinated with the gold trading business. Due to fluctuations in the gold price, they are trading gold online and making a decent profit. Many novice traders try to follow the professional traders and start taking trades in the gold market. But eventually, they fail miserably. To succeed in the gold trading business, you have to know the basics of the CFD market. Without having a strong strategy, you will always fail to make a profit in the trading world.
Today, we are going to discuss some key steps which will allow you to create a perfect gold trading strategy. Read this article with great care so that you can develop a premium trading system to trade the gold market.
Price driving catalyst
Before you start working on the development of the trading system, you have to know about the price driving catalyst. Factors like interest rate change have a significant impact on the gold price. So, if you are not aware of the price driving catalyst, you won’t understand why the market becomes extremely unstable all of a sudden. The only way you can protect your capital and look for quality trade signals is by educating yourself properly. Start with the news factor as it will give you a better overview of the market. Once you have the basic knowledge about the impact of news releases, you can start working on the strategy development process.
Identify the trend
Traders should be able to identify the trend properly to take quality trades. For that, you need to have a powerful trading platform. Check over here and see the premium platform offered by Saxo. Soon you will realize the importance of trading the market with a high-end broker. Try to connect the highs and lows in the market to find the critical support level. While drawing the trend line, use higher lows or lower highs. But the trend line should be connected in a natural way so that you can trade the major support or resistance level.
Look for the price action signals
After learning to find the critical support and resistance, you can take the trades by using the price action signals. Learning about the Japanese candlestick patterns is going to a tough task since you have to learn a lot about the different candlestick patterns. Once you become skilled in doing the proper market analysis, you will slowly become comfortable trading with the most reliable candlestick pattern. Novice traders can start learning about the pin bar and engulfing pattern. This pattern provides quality trade signals to gold traders in a stable market.
Test your strategy
After developing the basic trading strategy, you need to test your system. The test result must be satisfactory or else you need to bring change to the system. Thousands of traders jump into the online trading world without knowing everything about the market. They even don’t know the proper way to backtest their strategy. Backtesting is the only process by which traders can find potential faults in their system. By analyzing the faults, it is easy for us to review our trading mechanism. Thus, we will have the ultimate scope to improve our system.
Trading the real market
When you step into the CFD market for the first time, you will be uncomfortable at the first. This is very normal and there is nothing to worry about. Look for the trade signals in the higher time frame and take the trades by evaluating the support and resistance level in a standard way. Once you have determined the critical support and resistance level, start analyzing the risk factor. The risk should not exceed 2% of your account balance. If it does, you are on the wrong path. The only way you can protect your capital is by taking managed risks and looking for high-quality trade signals.