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Should you trade gold and silver?
Written by: PaxForex analytics dept - Thursday, 05 March 2015 0 comments
After you open your forex trading account and log into your MT4trading platform you will see a range of currency pairs offered to you which you can trade and earn pips from. Once you are logged into your MT4 trading platform, by default you will see the Market Watch window on your left side (in case it is not visible simply click View in the top menu bar and select Market Watch). Left click the Market Watch and from the drop down menu click Show All.
What did you just do? You have now access to all instruments offered by your forex broker for trading. In many cases after you install MT4 on your computer it does not show all by default and you need to activate this feature. When you scroll down you will see a lot of currency pairs and toward the bottom of the list you will also see gold as well as silver offered for trading. A forex broker who does not offer those two basic metals is either behind the curve or simply does not care.
Why is gold and silver offered? There are a few reasons for this. The biggest reason is to allow diversification of your overall trading portfolio. Having more options to find profitable trades will increase your ability to grow your trading account and gold as well as silver are a
great addition to your forex trades. Another reason is to reduce risk exposure. Risk management is not only about lot sizes, but also different asset classes. Typically commodities and forex are often combined and complement each other.
One of the best uses for gold and silver in your forex trading account is to hedge your forex trades. Commodities are an excellent way to offset risk. Gold typically is a safe haven resort which means when negative economic or geopolitical events occur many traders move to gold until the storm passes. So, let’s say you are long the EURUSD and a fundamental factor will drive down this currency pair and causes you to face trading losses, a hedge in gold can reduce those losses and keep your overall account balanced and protected.
What should you do next? Familiarize yourself with gold as well as silver and understand what influences those two commodities the most. Once you are done see if your forex trading strategy is suitable for commodities or if you need to make modifications to it. Create a risk management profile which allows you to use gold and silver as a hedge and in order to balance your overall trading portfolio. Do not leave those two great assets out of your trading arsenal.