How to trade gold: Instruction for beginners (Part 4)

Gold futures

Futures are contracts that allow you to buy/sell gold at a predetermined price. Most Forex brokers offer gold futures. You can use this opportunity to hedge risks and make profits.

Pros:
1. Price fixing.
Using gold futures, you can lock in the price of gold for the future. This is particularly useful for large companies that need to buy or sell large volumes of gold at negotiated prices.

2. Trading with leverage.
Investors who want to make money can resort to trading with leverage to increase potential profits. The key is to exercise caution.

3. Price advantage.
Gold futures give traders the opportunity to work at prices that are close to spot prices. This tells you that you can make even more money when the contract is up.

4. Hedging opportunities.
Traders can use gold futures to hedge. This will protect your investment portfolio from risk.

Cons:
1. A limited time.
Gold futures can only be traded for a limited period of time. This indicates that for long-term investments this tool can not be called ideal.

2. Low liquidity.
Difficulties in futures trading can arise if there is a lack of liquidity in the market. In particular, this applies to trading outside business hours and when major financial news appears at that time.

3. High commissions.
Most brokerages have large management fees when trading gold-based futures. This tells you that the return on your investment will be less.
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Follow our updates for useful information in our series of articles. You can also visit our previous article to better understand this topic.