Yuriy Ukazkin
Gold and silver are referred to the class of assets, and many investors regard them as stores of value at the times of monetary uncertainty, hoping that their price is more likely to withstand economic declines and crisis than that of any other class of assets.
This week one of the famous Russian traders Igor Zotov (Tomsk. Russia) has started online consultations on trading gold. What are the results of online gold trading for beginners? What conclusions can be made? These questions have been studied by the Analytics Team of the “Market Leader” and the experts of Masterforex-V Academy.
Results of Market Trading – Traders’ Opinions
“Results show that even at such seemingly inactive trade the outcome is good,” says Igor Zotov (author of Forex index AO_Zotik), “thus, 226 pp at the quantitative ratio of loss making and profitable deals that amounts to 1/4. At the same time, the quantitative ratio of all deals also amounts to about 1/4-1/5. In other words, the income from realized deals is several times higher than the gained planned loss, which is clearly shown by the charts of participants of trading:
Speaking about specific numbers, they are the following:
- at the size of account which amounts to 100% and work at moderate Risk Management, when not more than 10% of marginal deposit is used in trading, one gets a 2.3% increase to a deposit per week.”
For a better understanding:
- trade is effected with a certain volume, which amounts to the volume of an open position calculated from the whole lot = 1.0 lot
Trade by the whole lot 1.0 defines the volume of means involved in trade, which equals to one contract – 100 000 US dollars. On this basis, we can make up a ratio of involved assets.
- 1.0 = 100 000 US dollars,
- 0.1 = 10 000 US dollars,
- 0.01 = 1 000 US dollars.
Use of such ratio makes a risk-free trade. What does this mean? This means that if we have 10 000 US dollars on a deposit account, then if we work with a total volume of 0.1 lot – we work without credit leverage, offered by a company. This means that we work only with our money, without taking loans from the company, where we have the account, thus using 100% of our own means.
This is the same as if we would have come to a bank and exchanged 10 000 US dollars for gold (if working with gold).
This “equivalence’ certainly is relative, for in a bank our spread – difference between purchase price and selling price – is huge, namely about 40-50 US dollars per ounce. For example, in one of Russian banks:
We see that the difference between purchasing and selling gold is 57 rubles per 1 gram of gold. Then, 1 troy ounce equals to 31.1 grams; consequently, bank spread for 1 troy ounce amounts to 57 х 31.1 = 1772 rubles and 70 kopecks. According to the Central Bank of Russia USD/RUB, this amounts to:
As of March 15, this equals to 36 rubles and 64 kopecks (excluding USD/RUB spread). Total: the difference between purchasing price and selling price in a bank amounts to 48 dollars and 38 cents, whereas at Forex the spread is about 20 cents per troy ounce:
In some companies it is even smaller. These simple calculations show how better trading gold at Forex is; just like trading any other financial instrument.
So, if we use only personal means in trading without referring to loans from the company, this is so-called NON-marginal trade.
If our deposit is 10 000 US dollars, and we work with a 0.1 lot, then our earning will amount to 226 US dollars, which equals to a 2.3% increase per week. If we use the company’s credit leverage 1:10 further and use the whole lot of 1.0 at the deposit volume of 10 000 US dollars, our earning will then amount to 2 260 US dollars, which equals to 23% increase to a deposit per week. Further increase of marginal deposit is not considered, for higher marginal deposit leads to higher risks. However, we clearly see that the math is fairly simple.
This simple math and a concrete example show that:
- one can invest his means in gold by buying jewelry, coins, or ingots until he runs out of money. In such a case, he will pay extra not only for the spread, but also for work, connected with producing the item. Moreover, the more professionally the item is done, the higher its price is;
- more available and less costly way of investment concerns metallic accounts, where one should not pay extra for work with the item. On a metallic account you buy “virtual gold”, confirmed by bank liabilities. However, as far as we can see, this way of investment also presupposes extra expenses on bank spreads; this makes up extra expenses rather noticeable. Moreover, this may only be used for mid- and long-term perspectives;
- the most acceptable way is to invest in stock markets, which have least expenses for “trading decisions”.
I would like to remind that trading is a profession, which requires certain professional training, technical basis, and financial education.
Within the framework of a free weekly studying course on real-time gold trading Masterforex-V Academy (in the person of a leading trader of “System of Early Prediction in MF TS on the Basis of Modernization of АО_Zotik and WPR_Vsmark” Department) has shown how to make comparative analysis, assess current situation, and take correct trading decisions in correlation with the clearly set Risk Management (RM).
Only in such a way can work at Forex bring profit and pleasure from the work done.
Yuriy Ukazkin
