Saturday, August 2nd, 2014 by Michael Freeman
Gold is one of the underlying assets traded in the binary options market. Many Gold retail traders and shifting to binary options due to high cost of trading gold offline. The capital requirement is often in excess of $10,000 in the retail gold trading world while Binary options allows traders to initiate trades with less capital and a chance to get higher returns on shorter time frames, as you can trade $25 and with some brokers as low as $5 on a Gold option on time frames ranging from 30 seconds to 30 days.
In my videos and articles I always emphasize the important of focusing on one or two underlying assets when trading binary options and it’s the ideal approach while trading the Gold option due to the straight forward analysis and easy to use indicators that are required in order to evaluate the future short-term price movements of the Gold option. In fact, some traders including myself are trading gold multiple times every day, with my own signals group I have days where most of the signals I send to my subscribers were purely Gold Call trades and in my luckiest days I managed to pull %90-%100 ITM just by riding a Gold trend for the entire trading session!
Today I really want to break down the gold analysis for you guys, so all of you will be at the position to trade gold using a solid combination of fundamental and technical analysis so keep reading…
What makes gold tick literally?
Traders love gold because it is a safe-haven financial instrument which they can purchase in periods of uncertainty. As at late 2011, there was a major uncertainly in the market and the the price of gold shifted in an upward direction, this trend lasted for days at a time and continued for months. Traders who were lucky enough to spot these amazing trends, managed to pull thousands and hundred of thousands of dollars by riding the Gold trends with high trade amounts.
In order to understand Gold you have to look at the gradual increase in value over the years.. it’s one of the most stable long-term ‘uptrend assets’. in 2005 the price of gold was $513 .. and by 2010 the price almost tripled.. in 1970 the price was only $37! The increase in the value of Gold is mainly affected by scarcity, growing demand and when things are uncertain and people rush to buy gold. Scarcity and demand increase the price of gold over time, however ‘Uncertainty’ carries the short term affect we’re looking for as day traders.
The key to understanding GOLD is Uncertainty!
So if the ability to identify uncertainty is the key to understanding why Gold tends to go into a solid uptrend, what type of market indicators should we work with in order to trace down the ideal moments to enter call trades? and to remind you, the Gold uptrends are usually a matter of days, it can escalate to weeks but for us binary options traders, we are looking for the weekly type trends, allowing us to enter multiple daily call trades. I will also go over a technical analysis indicator you can use to verify your prediction in the next section on this article but first…Uncertainty can be triggered by one of the following: Market Indicators for Gold 1) Decline of the US dollar, Gold and the US dollar move inversely in value, forming a negative correlation. When the dollar goes down, the price of gold goes up. 2) When the Feds lower interest rates in hopes of promoting trade between banks, the value of the dollar goes down and the value of gold goes up. 3) Look for major events relating to the US economy.. with the growing deficit you can be sure that Gold is heading towards a smooth and long lasting uptrend.
The way things are looking with growing world-wide instability and as long as the US economy keeps heading in the direction it is going, at least for awhile, then we will almost surely see gold hit an all time high! So now that we all agree that the focus with Gold should be on identifying Up Trends..
Technical Analysis – Indicator for Gold There are lot’s of different indicators for short term analysis but in this case you’re looking for an indicator that can reaffirm a positive uptrend momentum and alert you incase of a potential reversal, which is why the MACD indicator is ideal. Now incase you are not familiar with the MACD indicator and how to set it up your free charts, I included an overview video provided by Investopedia.com on the MACD so check it out .
Complete list of free strategies and technical analysis indicators on the BinaryoptionsChannel.com
MACD Explained by Investopedia.com – Watch this short video!
Investing.com is offered free and you can set the charts for anywhere from 60 seconds and one month. If you’re planning to test this strategy or any other binary options strategies I recommend using a free demo account. If you are interested to participate in my signals group and follow my gold signals every day, Monday until Friday, you can signup on the signals group page and for more information on binary options strategies make sure to subscriber to the binary options blog!!
Thank you for taking the time to read this article! Cheers! Mike