Gold's value fluctuates from day to day because it is traded on public exchanges, and its price is determined by supply and demand. Gold attracts people even though they do not eat or drink it. It's been used as a form of currency because it doesn't corrode, and the material allows for some light absorption, giving it a yellow glow. People buy and sell gold for various reasons, including pure speculation, acquiring or distributing physical gold, and as a hedge for commercial purposes. Day trading gold aims to profit from its daily price fluctuations.
Important Points to Remember
- Speculating on short-term price movements is what day-trading gold is all about, and it's all done electronically.
- Futures contracts allow you to trade gold without actually owning it.
- To day trade gold funds or ETFs in the United States, you must have at least a $25,000 account balance.
Markets for Futures
Speculating on gold's short-term price movements is known as day trading. Physical gold isn't handled, and ownership isn't claimed. Instead, transactions are conducted electronically, with only profits and losses reflected in the trading account. Gold can be traded in a variety of ways. The most common method is to use a futures contract, which is an agreement to buy or sell something in the future, such as gold. Purchasing a gold futures contract does not imply that you must take physical possession of the metal. Each day, traders close out all contracts (trades) and profit from the difference in price between where they bought the contract and where they sold it. COMEX is the exchange where gold futures are traded. A standard gold future (GC) represents 100 troy ounces of gold, while a micro gold future (MGC) represents ten troy ounces of gold. Gold is only traded in $0.10 increments on the futures exchange. The smallest movement a futures contract can make is referred to as a "tick." The number of ticks the price moves away from your entry price when you buy or sell a futures contract determines your profit or loss. To figure out how much money you made or lost, you'll need to know the tick value of the contract you're trading. Although your trading platform will show you, it's a good idea to understand how things work. The tick value of a standard contract is $10. This is because the contract represents 100 ounces of gold, which equals $10 when multiplied by the $0.10 tick size. That means a one-trick movement will result in a profit or loss of $10 for each contract. You win or lose $100 if it moves ten ticks. Your profit or loss is $300 if it moves ten ticks and you hold three contracts. The tick value for a micro contract is $1. This is because the contract is worth 10 ounces of gold multiplied by $0. The cost of a tenth of a tick is $1. That means a one-trick movement will result in a gain or loss of $1 for each contract. If it moves ten ticks, you gain or lose $10. Your profit or loss is $30 if it moves ten ticks and you have three contracts.Futures on Gold
Your futures broker will determine how much money you need in your account to day trade a gold futures contract. You'll need $1,000 in your NinjaTrader account to open a position for one E-Mini Gold Futures contract. You'll also need enough money in the account to cover any possible losses. You'll need $2,000 in your account for a day trade of a standard Gold Futures (GC) contract, plus additional funds to cover potential losses. Intra-day margin is the amount required by your broker to open a day trading position. It varies depending on the broker and can change at any time. These figures are based on day trading and closing out positions each day before the market closes. If you hold positions overnight, you must meet Initial and Maintenance Margin requirements, which means you'll need more money in your account.Trading Gold, ETFs, and Stocks on a Day-to-Day Basis
Another option for day trading gold is to use a stock exchange-traded fund, such as the SPDR Gold Trust (GLD). You can trade gold price movements if you have a stock trading account. Because the trust keeps gold in reserve, its value fluctuates with the price of gold. The SPDR Gold Trust trades at about a tenth of the price of gold. In other words, if gold futures are trading at $1,500, the Gold Trust will be trading at around $150. The trust is traded in the same way as any other stock. Because the minimum price movement is $0.01, each time the price changes by a penny, you gain or lose $0.01 for each share you own. Stocks and ETFs are usually traded in 100-share blocks (known as "round lots"), which means that if the price moves a penny and you own 100 shares, you gain or lose $1. If the price rises by one dollar, from $120 to $121, your 100-share position gains or loses $100. On the same price move, you gain or lose $500 if you own 500 shares. The amount of money you'll need in your account to trade a gold ETF is determined by the ETF's price, leverage, and position size. In order to day trade stocks or ETFs in the United States, you must have a minimum balance of $25,000 in your account. Depending on how much money you want to make and leverage, you may want to have more than $25,000 on hand.Questions and Answers (FAQs)
What exactly is "spot gold" in the trading world?
The term "spot" refers to the current market price of a security. The "spot gold price" is the price at which an ounce of gold could theoretically be purchased at any given time, according to traders. This distinguishes it from the prices of gold-tracking products such as futures, ETFs, and options.What is the current price of gold?
Because gold prices fluctuate throughout the day, a price published today is unlikely to be accurate tomorrow. A trading brokerage will provide you with access to the gold price as well as charting software for studying price fluctuations. There is also charting software available from third parties.