Gold is one of the high profile assets and it occupies a strategic position in the markets because of its safe-haven properties. You’ll be hard-pressed to find a diversified portfolio that doesn’t have exposure to gold. More interesting is the fact that investors often flock to gold during times of increased volatility and uncertainty in the economic landscape. In fact, the price of gold tends to soar when the equity markets experience weakness in stocks.
However, the current trading price of gold often prices many retail traders and investors out of the gold trade. For instance, gold currently trades around $1,165 an ounce and a $10,000 investment would buy you a mere 8.6 ounces before commissions. Hence, many investors and traders who could have profited from gold are often forced to stay on the sidelines because they can’t afford the investment. This article however provides insights on how to trade gold without owning the bullion.
Meet gold binary options
Gold binary options are derivative assets that allow you to profit on the price movements of the yellow metal without you buying or owning the bullion. The binary options are derivative assets in the sense that you are trading the contracts, which helps you to track the price movements in gold at a fraction of the cost requirements for investing in gold bullion.
The first reason retail traders love trading gold with binary options is that it allows you to access the gold markets without an exorbitant trading capital. Secondly, gold binary options allow you to trade gold in a “controlled” environment where you don’t need to worry about massive reversals that could lead to the loss of previous gains. Thirdly, gold binary options have a definite payout so that you’ll know how much you stand to gain even before you place your trade.
Major types of gold binary options
Touch/No Touch Binary Trades
In this kind of binary option trades, you’ll need to place a trade on the possibility that the price of the precious metal will (or won’t) get to a predetermined price known as the strike price. When you place a trade on the possibility that the price of gold will reach that strike price – you are placing a Touch binary trade. If you place a trade on the submission that the price of gold won’t reach that strike price, you are placing a No-Touch binary trade.
The Touch/No Touch option has different variations such as the double touch option and double one touch option. The most important thing is that the yellow metal should trade in line with your forecast before the contract expires.
In/Out Binary Trades
This kind of gold binary option trade often becomes prominent when the yellow metal is trading within a range. The upper trend line on the trading chart could form a resistance point while the lower trend line will form a support level. Binary option traders with exposure to gold could place In/Out binary option trades on the possibility that the yellow metal will stay within the range or get out of the range before the expiry of the contract.
You’ll place an In trade if you expect the yellow metal to stay within the range over a certain period – you’ll earn a predetermined payout if the bullion stays within that range. You can place an Out binary options trade on the possibility that gold will breakout above the resistance trendline or breakdown below the support trend line – you’ll also be rewarded if the trade follows your forecast.
High/Low Binary Trades
This binary options trade is similar to the traditional options that stocks traders use to hedge their portfolios. In the High/Low gold binary option trade, you’ll place trades on the possibility that that the yellow metal will end the session higher or lower than its “current” price before the end of the session.
If you place a High binary trade, you are putting your money on the possibility that the price of the yellow metal will be higher than the strike price when the contract expires. If you place a Low binary trade, you’ll put your money on the possibility that the price of the yellow metal will be lower than the strike price at the end of the session.
A word or two on brokers
It is important that you choose a broker that will make your binary options trading simple, stress-free, and profitable. You might want to read reviews of different brokers in order to know the trusted binary options brokers in the market. For instance, most brokers offer web-based trading platforms while some brokers often go the extra mile to provide a mobile app. Beginners might also want to sign up with a trader that has a loaded resource center and real-time assistance support system.
You might also want to choose a broker based on their reputation for paying bonuses and payouts. It is also important that you choose a regulated broker so that you can have a third-party endorsement of their trustworthiness.
This article is written by guest author, Luis Aureliano.