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Online Precious Metals Trading: What to Know

Trading / 25 Feb 2022

Are you interested in entering the exciting world of online precious metals trading? If so, get ready for a scenario where prices change relatively rapidly, you can speculate on price moves in any direction, and millions of other traders keep the action interesting, liquid, and engaging around the clock. What are some of the fundamental points every precious metal trading enthusiast should know about? First, it’s essential to understand what financial analysts call the safe haven effect. This is directed at investors who want to reduce the risk as much as possible when trading precious metals.

Plus, for those who don’t want to take on the risk of buying and holding bullion or shares of mining stocks, CFDs (contracts for difference) are one of the simplest ways to trade precious metals. All four of the precious metals occupy an important niche in the global trading universe. Of course, silver and gold are by far the most active of the bunch. But, don’t be surprised by the continuous attention paid to the other two: palladium and platinum. The four are known as the primary precious metals and are among the most popular with investors and traders all over the world.

The Safe Haven Effect

Unlike most other financial instruments and traded assets, including stocks, bonds, options, futures, and commodities, gold and silver enjoy something called the safe haven phenomenon. That simply means that large numbers of people view those two metals as not only new investment opportunities but as a safe place to park money when other choices appear to be more volatile and riskier. For example, you’ve possibly noticed that when the global stock markets have bad days or weeks, the price of gold tends to rise. This doesn’t always happen, but it occurs frequently enough that traders keep an eye on the price of both gold and silver whenever the traditional securities exchanges appear to be in trouble.

Using CFDs (Contracts for Difference)

CFDs let you speculate on price changes in the precious metals without having to own any actual metal or shares of stock backed by metals. One reason for the popularity of precious metal trading via CFDs is simplicity. There’s also a safety factor because you can set specific stop-loss points to protect yourself. When you open an account with a CFD provider like easyMarkets, for instance, you can use technical analysis indicators to decide when to get into the precious metal markets, how much of your capital to commit to a particular transaction, and where to set stops. Metals trading via CFDs is quick and easy, and account holders can potentially benefit when prices rise or fall, depending on how accurate their predictions are. Thus, there is no need to worry about short selling or dealing with all the legal requirements that shorting often entails.

Specialization Adds an Advantage

When you choose to focus on the precious metals (gold, silver, platinum, and palladium), you’re actually becoming a specialist in a niche of the commodities market. Instead of trying to navigate and understand hundreds of stocks, bonds, and options, you have the luxury of honing in on one asset class, namely the precious metals. How does that help? For the majority of part-time and full-time trading enthusiasts, specializing gives them keen insight into the way prices move over short-term and long-term periods.

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