Myth About Forex Gold Trading Debunked
There are a lot of misconceptions and myths about gold trading in the Forex market. These myths make investors reluctant to trade in commodities. The misconceptions were purported by frustrated investors who did not know how to trade commodities such as gold and silver successfully in the Forex market. Here we debunk some of the myths apropos gold trading in the Forex market that is just not true.
Myth #1: Lack of Leverage Leads to Dismal Profits
Since US traders are not allowed to trade in commodities using leverage, a number of traders have assumed that it leads to less profit as compared to leverage trading. They think that without leverage it is not possible to gain from gold trading in the Forex market. This myth is a major factor that prevents investors from investing in the Forex market.
The reality however is that lack of leverage is a blessing in gold Forex trading. Leverage increases the risk of loss of the investors. Higher leverage no doubt results in higher profits, but it also increases the chance of loss. Most investors lose huge amounts of money just by utilizing high leverage. If the market prices moves contrary to expectation the entire amount may be wiped off due to higher leverage.
Lack of leverage is in fact a blessing as you invest your own money in trading gold with currency and earn respectable income. There is less risk on your investment as you take the risk that you can afford and earn respectable income from the trade.
Myth #2: Gold Forex Trading Requires Taking Delivery of Gold
Another misconception about gold trading in the online forex market is that forex gold trading entails taking delivery of physical gold. Many people believe that trading commodities in the Forex market entails bearing the cost of transportation and storage of physical gold. They believe that the cost of physical delivery and transport will eat away their investment reducing their profit amount.
The reality is that gold forex trading does not in any way involve taking physical delivery of gold. The benefit of gold trading in forex is that you do not have to fret over cost associated with holding physical gold. There is no need to worry about the cost of storing, insurance, or transportation of physical gold. No physical delivery of gold takes place when you purchase the commodity in the online Forex market. You only have interest in a specific sum of gold that you relinquish once you close the trade.
Myth #3: Forex Gold Trading Requires Making Huge Investments
This is also an unfounded misconception regarding gold forex trading. A number of investors in US think that since trading commodities like gold using leverage is not allowed in the Forex market, they will have to make huge investments to profit from the trade.
The reality is quite contrary to the myths. In fact, you should never put all your investment in gold trading during a particular period. Although commodity brokers allow you to open an account using $2,500 – $5,000, putting this entire amount in gold currency pair at one time is not advised at all. It is better to have a certain objective in mind and regularly invest a portion of this amount. You would do much better by aiming for a 25% return on the long run rather than trying to hit a home run and earning the returns within a short span of time.
Myth #4: Trader do not Gain From Trading Commodities
This myth as said before is purported by traders who do not know how to trade commodities like gold successfully in the online Forex market. The losers are usually ill prepared and make bad timings relating to gold Forex investment never to return.
The fact is that trading gold in the Forex market entails perfect knowledge of the factors that drive the precious metal prices. You have to know the trend of the gold prices to make you move and gain from the trade. Trading in gold currency is unlike other currency trading. The factors that push non-commodity currency values is quite different from those that drive commodity prices. Gold trading in the Forex market fact is a perfect way to hedge US dollar currency as it is negatively correlated the US dollars.
The difference between amateur and professional traders is that amateurs tend to live in a fantasy world of myths that makes them reluctant to fully avail the benefits of forex trading. Professional traders, on the other hand, know the difference between myths and facts. They trade with accuracy using excellent timings to utilize the most from gold trading in the Forex market.