Buying Gold Futures
Everyone wants to invest in gold because it’s the only metal that never looses its value. It can be turned to jewelry, traded, made in coins or used on special circuits. The demands are very high for this precious metal and because it’s so hard to extract it from the ground its price got really high and continue to go higher as each year passes. An investment in gold futures can lead to good profits over the years.
Of course, like in any other trade business, you must have an idea about what gold futures are and how you trade them. A lot of people will advice you to buy them but we recommend that you should learn a few things about gold futures before throwing your money. This investment is quite risky and if you choose the wrong period of time to invest in gold futures you may end up loosing a lot of money.
The gold prices got this high due to the crisis we all face and due to other factors. A gold future can be defined as a contract that stipulates what quantity of gold you’ll buy, at what price and on which date. When you buy these futures you assume that the price you paid is lower than the price gold will have at that moment in the future. If you are right, you win, otherwise you will loose.
You can invest the money either by buying Futures or “On margin”. The first is a bit safer and requires you to pay the futures 100%. The other option requires the pay of only 5% of the amount you want to invest but is a bit risky because if the price increases by 5% then you can double your investment and if the price decreases by 5% then you loose the full invested money.
How to Buy Gold Futures
1. First step is to open a futures trading account with a retail investor. Find for retailers offering discounts as it will help to minimize your transaction cost.
2. Observe the gold market and the futures trading patterns before you actually get your hands wet.
3. Do some mock trades to get used to this game.
4. Invest some minimum money and buy gold futures contract.
5. It is better to trade in the months of June and December and it will keep your transaction costs to minimum.
6. Use stop sell order to minimize your loses. It is an order to sell your futures once the price goes below a certain value set by you.