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Should I Day Trade or Swing Trade Gold?

Introduction to Gold Markets

Gold has been a precious metal with sentimental and monetary value since ancient times. It has been used as a medium of exchange for thousands of years. In many ways, the story of Gold is the story of human civilization.

Through the long centuries gold has retained its value as a much desired precious commodity that remains a symbol of wealth and affluence as well as an alternative form of monetary insurance in times of financial adversity.

So, how can I invest in Gold you may ask? Well, there are a number of ways to trade gold.

One popular way is to purchase the metal in the form of gold bullions or coins from a reputable gold dealer. However, it goes without saying that this would be quite expensive. Not to mention the fact that the gold would then require safe keeping either at home or in a bank and, of course, an insurance policy to match in case the worst was to happen.

A more sophisticated but less expensive way of trading gold is through the stock market where gold can be bought or sold with ease either as a commodity in its own right, through financial instruments that track the price of Gold (Exchange Traded Funds or ETF), through financial products backed by gold or through futures contracts and options.

Gold can be traded in the short term as day trades where trades are opened and closed on the same day, or in the longer term as swing trades where trades are held for days to weeks or even months.

This simplicity with which gold can be traded on the stock market has made it possible for anyone to day trade or swing trade gold.

Let’s take a closer look at how swing trading and swing trading work.

How to Day Trade or Swing Trade Gold

What is Day Trading?
Day trading is a short-term style of trading where trades are opened and closed on the same day. Traders buy and sell their financial products on the same day. Gold traders would do same. Day trading relies on a measure of volatility resulting in price swings in the market to make profit. If the price of a financial instrument is slow and steady, it is difficult for day traders to make money. The Gold market attracts a decent amount of intraday volatility enough for successful day trading. Slow and steady doesn’t work so well for day trading Gold but is great for swing trading.

What is Swing Trading?
Swing trading on the other hand is a longer term style of trading where the trades last from a few days to several weeks.
As we know, the market moves in waves with upward and downward swings. The aim of swing trading is to capture these price swings for profit. The swing trader does this by entering a trade at the start of a swing and exiting the trade before the swing ends. These swings are best captured on the daily time frame. The swing trader’s main challenge therefore lies in being able to identify the start and end of a swing so as to correctly time the entry and exit of trades. Swing trading relies on technical analysis to identify the start and end of price swings. This is done through chart analysis of price patterns. Swing trading works well for trading gold and is also suitable for trading stocks/shares, currencies and commodities.

Advantages and disadvantages of Day Trading?
Day trading has its advantages. All trading positions are opened and closed before the market closes for the trading day. This avoids the risks associated with overnight price fluctuations and also eliminates any worries about price gaps that may occur between the close of one day and the next day’s opening price. The day trader does not need to worry about overnight taxes either.

A significant drawback of day trading is that it is fast paced and requires an enormous amount of concentration. It requires the trader to be quick to react to price movements and nimble enough to change trading direction speedily when needed.

The day trader needs to know their craft well to enable them recognize trading opportunities once they set up and execute the trades with precision. Because day traders tend to place a large number of trades in a day to break even and make a profit, commissions, spreads and other fees paid to the broker tend to accumulate and could wipe out any gains realized from trading. This is another important disadvantage of day trading.

Advantages and Disadvantages of Swing Trading
Swing trading has many advantages, first and foremost, as trades are held for longer periods of time than in day trades, the profits per trade are larger. Swing trading is less intense than day trading because traders only need to check on their trades once a day in the evenings. The frequency of trading is also less. The fees paid to the broker in terms of commissions per trade and spreads are also less compared to day trading. These factors make swing trading well suited to people who are busy during the day and want to trade on the side on a part time for additional income.

The fact that trades are held for longer than one day means that swing trades attract overnight fees and are also at risk from overnight price fluctuations as well as price gaps. This is obviously a major drawback. Another disadvantage is that Swing trading requires a lot of discipline and patience and these are virtues that many traders have in limited supply.

Conclusion
This brief overview has discussed the opportunities and methods available to trade gold. Individuals who trade full time can day trade gold while people with limited time during the day can swing trade. The stock market has made it easy for anyone to buy and sell gold in novel ways at affordable prices. How to participate in trading gold is only limited by the imagination.

The Importance Of A Trading Education

Money management, identifying risk, chart patterns, psychology, routine, personality, strategies, software and training are incredibly important for being able to reliably make money from trading. Whether this is your first time taking on the forces of the market or you’ve had limited success and want to improve that potential, we have a course that’s right for you. If trading sounds interesting to you, then please remember to check out Learn To Trade Online; it’s a FREE on-demand training course that we offer and covers day trading, swing trading and many of the basic concepts. In the mood for something a bit niche? Sign up to our next live and interactive topical webinar – a 2 day introduction to trading taking place in March 2022. Book your FREE spot now!

Are you ready to start your trading education? Good news, registration is now open for our Pro-Trader Programme! Join now and learn how to generate a reliable second income that fits around your professional schedule or even turn trading into your full-time job. Click here for more information.