Trading Basics Concepts
Learning to trade the market is much easier for beginners when beginners begin by learning the basics. This way the other concepts become much easier to learn because the new trader will have already learnt about the basic ideas before proceeding to the other concepts.
The basics that traders should learn first before starting trading are:
What's Gold?
XAUUSD is the simultaneous buying and selling of one financial instrument for another. Traders buy and sell for speculation purpose and for the purpose of trying to make a profit. Traders will buy a xauusd that they think will appreciate in value and sell the xauusd which they think will depreciate in value.
In traders buy xauusd instruments when they become undervalued and sell instruments when they become overvalued. This is the basic concept of trading xauusd, as a beginner if you want to become successful when xauusd trading you must learn to buy undervalued xauusd instruments & sell overvalued xauusd instruments. Many traders miss this concept and do the exact opposite buying overvalued xauusd instruments because that is when these instruments seem to be moving up and up and they sell undervalued xauusd instruments because these instruments seem as if they will continue to move lower.
Just like in stock market successful trader buy stocks when the stock price is low and sell stocks when the stock price is high. This is the same concept that traders should follow when trading xauusd.
What's a Trade Instrument?
Xauusd trading is the simultaneous exchange of one financial instrument for another, for this reason xauusd are traded in symbols known as xauusd.
What's a Quote?
Because xauusd are traded in symbols, the price at which these instruments are exchanged is determined by the quote.
XAUUSD quotes in XAUUSD are quoted in the format of 4 decimal places.
What's a Pip?
Xauusd is quoted in the format of decimal places. Second last decimal place represents a Pip which is the smallest movement used to calculate profit and loss in market moves.
Pip means Price Interest Point: it is a one point move in the quote.
What's a Lot?
XAUUSD is traded in units known as lots. There is also the Mini lot which is made up of fractions of the standard lots and the Micro lots which are fractions of the xauusd mini lots.
Therefore, in the above example where the instrument moved up by 50 pips if a trader was trading using one standard lot then their profit would be $10 multiplied by 50 pips which is $500 dollars.
What's Leverage?
Because not many traders can afford to trade standard lots which require a lot of money to trade, there is leverage in XAUUSD which means that traders can borrow money & use the borrowed money to make trades with. For example leverage of 100:1 means that a trader with capital of $10,000 can borrow up to 100 times using the 100:1 leverage option and therefore after borrowing using this leverage the trader will now have a total of $10,000 multiplied by 100, which means the trader will have total of $1,000,000. This leverage is what makes XAUUSD Trade accessible to retail traders because retail traders can begin with little capital of their own and use leverage to borrow the rest of funds required for trading. The money that the trader deposits is referred to as a trader’s margin and a trader can continue borrowing money using this leverage option as long as they have the required margin in their account. This is why traders must have the required account balance in their account to open the trades they want to.
What's XAUUSD Margin?
Margin is the specific amount of money that a trader is required to put aside in order to continue holding an open leveraged trade. Margin can also be explained as the deposit a trader is required to keep so as to maintain his open positions. This margin is a percent of account equity that has to be set aside and allocated as a margin deposit for the open positions that are held by a trader.
