0 How To Trade Gold

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Trading Gold: Professional Secrets Education
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you understand the risks involved and if necessary please obtain investment advice from a financial adviser before investing.
This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
About This Report

The basics of financial trading can take just a few hours to master, but it is time well spent - potentially serving you
for a lifetime. Thats not to say that the work stops there. There is more to learn every day. Private individuals can
make an excellent living trading the financial markets, and with time and patience most novices can become self-
sufficient. Some find it intuitive - born traders. Others take longer to find their niche and forte. Whatever your
experience, there is a mountain of excellent material from which to draw upon to help you develop and perfect
your trading strategy and attain your goals.
This report is designed to provide you with a broad introduction to some of the methods you could employ to
identify trading opportunities, and to develop your trading strategy. There is no right or wrong way to trade the
financial markets. It is differences in opinion which make the market so dynamic. This report, we hope, will give
you a foundation from which to decide on what you want to trade and how you want to trade it.
Choosing your trading strategy

Strategic planning is important preparation for every successful trader. You need to know what youre aiming to
achieve. Formulating a strategy is key to help you know what you want to achieve, help you stick to your plan and
allow you to evaluate your performance. Perseverance and discipline are also required.
There is an array of trading strategies that work. Testament to this is the range of successful hedge funds involved
in the financial markets, all trading different assets and using different strategies. There is no right or wrong way to
trade, different strategies work for different traders - some find themselves particularly talented at anticipating
market moves using certain methods.
Technical analysis
Technical analysis, otherwise known as charting, is widely used by professional and amateur traders alike. It
involves forecasting the movement of asset prices by studying past data, which typically includes price and 1
volume plotted on the graph/chart. Technical analysis is essentially concerned with the anticipation of crowd
behaviour (herd mentality) and market sentiment. This contrasts with fundamental analysis, which is concerned
with an assets fair value.
The basic principle of technical analysis is that an assets price reflects all relevant available information.
Therefore, the assets trading pattern, rather than external drivers such as economic, fundamental and news
events, should tell the trader all they need to know. Price action tends to repeat, because crowds tend toward
predictable, patterned behaviour hence the technical analysts focus on conditions and trends.
Back-testing
Back-testing is the evaluation of a trading strategys performance, assuming it had been employed historically.
Results do not tell you whether the system will work in the future (future market conditions will always be
different), but give an idea of the success rate the strategy would have had. The longer the time-frame used, the
better idea you can get. It also allows analysis without having to incur the costs of the losses likely incurred along
the way. While it can work well for one thing (a particular share, FX pair, commodity or index), it does not mean it
will work for all. Often, different systems are needed and used for each.
While back-testing used to be a very laborious and expensive process, this is no longer the case. Advances in
technology mean the tool is now accessible on many trading software programmes and charting packages used
by retail investors. Back tests can range from being extremely simple, based on a single criteria, to extremely
elaborate tests involving multiple conditions.
Our research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent
research, and is therefore a marketing communication. Accendo Markets research has not been prepared in accordance with legal requirements designed to
promote its independence and may not comply with FSA guidelines to prevent conflicts of interest and is not subject to any prohibition on dealing ahead of
the dissemination of research. As such, this research does not constitute a personal recommendation or offer to enter into a transaction or an investment,
and is produced and distributed for information purposes only. Accendo Markets considers information contained within the research to be valid when
published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up,
and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.
Prepared by Michael van Dulken, Analyst
Accendo Markets Ltd is Authorised and Regulated by the Financial Services Authority (FSA) No. 475285. We offer CFD, SpreadBet
and FX Trading Services Accendo Markets Ltd, Registered in England and Wales No. 6417051. Registered Office: 64 London Wall, Trading with a Personal Touch
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If, for example, you notice that the last few times Barclays share price has moved up through its 50-day moving
average that the shares continued to move higher, you might want to back-test a Buy strategy. You could set up to
test over the last five years, evaluating the performance of a strategy buying each time the shares moved above
the 50-day moving average, and closing when the shares fall back below. The strategy could be expanded to go
short on every move below, and closed every time the shares moved back above. Should you see that the
strategy would have returned an interesting return over the 5 years, you might decide it worth following the signal.
One thing to consider through is the maximum loss the strategy would have incurred during the time-frame. Five
years is a long time. There may have been several bad signals and a run of losing trades. Could your capital base
have managed this? If not, the system may not be appropriate and require refining.
You can back test your strategy with Accendo Markets trading platforms and charting software. To receive your
trading platform login, you need to open an account. There is no extra charge for you to back-test your ideas, and
it costs nothing to open an account.
To open your account now and start back-testing your ideas at no risk, visit our account application page.
Pairs Trading
Pairs Trading is designed as a market neutral way of trading, whether the market is rallying or falling. The strategy
involves trading two historically highly correlated securities (eg. shares, commodities, indices) when the
relationship has broken down. The strategy involves going long on the underperformer and short of the
outperformer with the hope that the spread/relationship between the two returns to its historical average.
The idea in trading correlated stocks is that the two should move in a similar (if not the same) manner whatever
way the market moves; any losses on one being offset by gains on the other. As long as the long rises more than
the short rises, or the short falls more than the long falls, the strategy will be profitable.
2
The most popular way of trading is with two highly correlated equities likely from the same sector which removes
both sector and market risk. Two miners (for example, Rio Tinto and Anglo American) or banks (for example
Lloyds and RBS) might be good examples.
Interesting pairs can be back-tested to evaluate the success rate of the spread returning to the mean.
You can trade a very huge range of markets with an Accendo Markets trading account, including many pairs
trading opportunities.
To open your account now and start practising your pairs trading strategy, visit our account application page.
Arbitrage
Arbitrage is similar to pairs trading. It involves looking at the historical relationship between two securities and
trading with the hope the relationship returns. Examples include looking at the shares of a company which is listed
on two different exchanges in two different countries. If the difference between the two share prices is more than
the exchange rate between the two different countries, there may be a trade opportunity.
Other options include the difference in the price of oil in two different locations. With oil traded in US dollars,
exchange rate risk is negated, meaning you could buy oil in the cheaper location and sell the same oil in the more
expensive location, profiting from the difference.
In many cases arbitrage requires trading in large size to allow profiting from the usually small differences in price.
As with Pairs trading, back-testing can be used to analyse the theoretical historical success rate of the price
differential correcting from a given level.
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Using orders (stops and limits)

Stop orders can be used to put you into a trade when it starts moving in the direction you are hoping. They are
used to jump on the back of existing momentum, allowing you to wait for confirmation of momentum and allowing
the trade platform to take care of executing the order when the price meets your criteria.
Limit orders put you into a trade when the price falls back, to give you a better entry point. If you believe a price
may move higher you might place a limit order below the current price to give you a better entry point. To be sure
you dont miss out on any up move, you could also use a Stop order above the share price to ensure execution if
the price starts immediately moving the way you were expecting and fails to trigger you limit order.
Stops and limits are important tools for ensuring execution at the desired level. They are also significant in
allowing emotion to be removed from the equation leaving the trading platform to execute the trade automatically.
Accendo Markets platforms will allow you to utilise a range of automatic orders, including stops and limits.
Fundamentals
Trading on fundamentals involves focusing on company specific events to decide what to buy/sell and when to do
so. It is more associated with the traditional long-term buy-and-hold strategy than short-term trading, but can be
used for both. Trading around scheduled, anticipated or unscheduled events (such as company financial results
publications, drilling announcements, product launches, take-overs, broker upgrade/downgrades, profit warnings,
macroeconomic data) often result in big moves.
Trading on fundamentals contrasts with trading technicals which, as discussed earlier, involves using price charts
to identify support, resistance and patterns etc. to try and help you decide where the price might go next.
Ahead of scheduled or much anticipated events (such as company results, drilling reports) if you believe they
might be better/worse than expectations, you might trade the shares hoping that the build-up to the results might
3
see others move in and force the price in your favour. You could then close out before results or, if convinced the
shares still had potential to react to the event, hold on until after.
The same applies for unexpected events (broker upgrade/downgrades, take-overs, profit warnings, macro data).
When they occur, you can trade the shares in anticipation that the existing move has legs as more and more
people try to profit from the move.
Accendo Markets research can tell you what will be announced and when. Our exclusive research, produced in-
house by our analysts, is available to all active CFD clients at no extra charge. If youd like to receive a free 14-
day trial of our research, please visit our research trial application.
Day Trading
Day Trading (or intra-day trading as it should really be known) refers to the buying and selling shares, FX, Indices
and commodities within the same trading day, never holding a position overnight. The idea is that you are not
sitting on any risk overnight. You may miss out on interesting overnight moves by not keeping positions open, but
you cant lose any money based on world events or macro-economic data which may materialise in the wee
hours.
Day traders spend their time looking for set-ups - situations where the price (of a currency, commodity, index of
share) is set to move. Positions can then be held for anything from a few seconds (see Scalping below) thorough
to several hours. They may trade just once in the day, they may trade tens of times. Discipline and risk-
management are key with day-trading.
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Day traders usually identify opportunities via breakouts from support/resistance or patterns on price charts. Other
technical indicators used include momentum (see later), volume, and Fibonacci levels (% retracement of prior
moves).
The practice used to be limited to firms and professionals, however, advances in technology now mean that
anyone can now trade almost anything from anywhere in the world as long as they have a trading account and
access to the internet.
Note that Day Trading can sometimes be a misnomer, with some traders holding positions overnight if they have a
strong conviction that they should let an existing position run, or look to profit from an overnight move.
To open your account now and start practising your day trading strategy, visit our account application page.
Scalping
A derivative of Day Trading, Scalping involves trading big positions for very short lengths of time with the aim of
capitalising on small moves. The idea is to do this several times a day. When positions start going sour, they are
closed very quickly, limiting losses and preserving capital for use with later opportunities. The hope is that the few
successful trades can offset the several unsuccessful trades. Stop orders can be used to enter on momentum and
Limits placed a short distance further to capture a profit. Risk can be limited by using closely set Stop Losses.
Reading List
This report is a broad introduction to just some of the trading methods you could employ in your trading activity.
Our daily research and charting software (both of which are provided to all active clients) should give you the tools
you need to reach your trading goals.
Accendos Head of Research has worked in the city for a decade and studied for several exams focused on
securities, derivatives and technical analysis (charting). Some of the reading material he has devoured over the
4
years includes the below list. His top ten is below comes highly recommended for everyone from the beginner
through to the seasoned trader.
All provide excellent material to help further comprehension of the worlds financial markets and development of
trading techniques and strategy.
1. Technical Analysis of Stock Trends (R. Edwards & J. Magee)

2. Technical Analysis of the Financial Markets (J. Murphy)
3. Technical Analysis Explained (M. Pring)
4. Candlestick Charts (C. Lambert)
5. Cloud Charts, trading Success with Ichimoku technique (D. Linton)
6. Trader Vic: Methods of a Wall Street Master (V. Sperandeo)
7. Market Wizards: Interviews with Americas top traders (J. Schwager)
8. New Market Wizards: Conversations with Americas Top Traders (J. Schwager)
9. The Way of the Turtle (C. M. Faith)
10. The Naked Trader (R. Burns)
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Why should you trade Gold?

The yellow metal has become one of the most popular commodities (after Oil) to trade by individual traders over
the past few years thanks to its meteoric rise from $750/oz around the time the financial crisis struck (mid 2008) to
its highs of $1925/oz (+156%) as the worlds financial woes morphed from one of US subprime mortgages and
bad debts to one of Eurozone sovereign debt. Volatility has made it a preferred trade of many.
Despite having no real worth and providing zero income, it is considered a hedge for inflation (something fuelled
by the money printing central banks have embarked on to kick-start their flailing economies) and a port in a storm
(store of worth, safe haven) in times of crisis. The metal is driven by both physical demand (jewellery and long
term investment) and speculation, the latter increasingly driven by fears of global meltdown and expectations of
how the US Dollar will move (commodities mostly denominated in US dollars) depending on more or less money
printing in the US. Printing more, makes the dollar weaker which makes gold cheaper to those whose home
currency is different.
Additional benefits of trading Gold (like commodities, Forex and indices) include it being tradable 24hrs a day, five
days a week, the market open Sunday night to Friday night. Trading contracts benefit from low margin
requirements and the option to trade in both directions up or down.
Why should you trade with Accendo Markets?

Accendo Markets exists to help you trade Gold the way you want to, and with confidence. We do this by providing
you not only with someone to speak to for market insight and help with placing trades, but also via access to our
exclusive in-house research - a host of daily and weekly publications, to help you navigate the markets, and
further your education.
Our morning report lets you know how Gold has traded overnight and why (example). Our Week Ahead lets you
know what major macro-economic data could impact your Gold position the following week (example). Our daily
calendar takes this a step further, with a more detailed breakdown of potentially market-moving events scheduled 5
for the following day. This is updated live throughout the trading day, letting you know where data was
better/worse than expected (example). Our FTSE Focus publication looks at the UK flagship index over 4 different
time horizons identifying potential support and resistance for both long-term, short-term and day-traders. This
gives you an idea of how the major world indices are moving based on current sentiment (example).
How to trade Gold using CFDs

Placing a trade in Gold is a simple affair, carried out on a dollar-per-point basis. If you believe the price of Gold will
rise over the course of the next hour/day/week because the chart is giving you signals or you expect events which
could have a positive bearing on the price, you could take a Long position for as little as $10 per point (Note: that
there is also a 1 per point contract available). If the price rises by 100pts you stand to make $1,000. If, the price
of gold, however, falls by 100pts you would stand to lose the same amount. Your risk could, however, be limited to
$200 by placing a protective stop 20pts below your entry level. If the trade moved into profit, your stop can always
be moved to lock in any profits. If you expect the price to fall, the setup of a Short trade position works the same
way, just in reverse. In summary, CFDs offer you a simple way to trade Gold up or down whilst maximising your
profit potential.
For a worked example of setting a Gold trade, see over

------------------------------------------------------------------------
Should you have any questions on how to trade Gold with CFDs or Spread Betting,
including the various ways in which your risk can be managed,
call us to discuss on 0203 051 7461
----------------------------------------------------------------------
Open a Demo account Click Here
Subscribe to a Free Research trial Click Here
Apply for a Live Account Click Here
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Login Apply Now
The below chart identifies the 5 stages of a Gold trade
1. Gold gets to level you wish to trade at; for example, breaking above trendline of prior falling highs.
2. Long position opened at $1,591.
3. Trailing stop-loss placed at $1,586, limiting risk to $5.
4. Gold rises by $14 to new high of $1,615. Trailing stop remains $5 behind, moving up to $1610.
5. Gold falls by $5 from high, trailing stop triggered at $1,610. Trade closed with gains of $19.
2 5
6
3
Had the above trade been placed on a $100 per-point basis, your position would have initially been risking $500
(5pt loss x $100/point). When the trade moved in your favour the trailing stop would have moved up in-line, first to
breakeven (stop in-line with entry point) then to protect profits (stop above entry point). When Gold hit its new
high, the position would have shown a profit of $2,400. With the tailing stop still 5pts below, you would be have
been locking in profits of $1,900.
Please note, however, that had you not had a protective stop in place and the Gold price fell rather than rose, you
would be liable for any declines.
Other ways of helping yourself in trade set up include the use of technical indicators. For more, see over
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Support and Resistance Identifying Entry and Exit Levels

If the below chart applied to Gold, you would be in a position to identify levels of Support and Resistance. So
long as these levels remain unbroken, you could assume that the metal will continue to trade within this range, or
channel, as the below example has done since mid-2010 when two highs and two lows would have allowed you
to draw and extend trendlines.
If one of these levels is broken, you would then be in a position to look to the next higher/lower level as the next
level of potential resistance/support. The breakout level would likely reverse its prior role (support becomes
resistance, resistance becomes support) for any subsequent rally/declines.
Monitoring support and resistance in Gold could help you identify optimal entry and exit points. Of course, support
and resistance levels reflect sentiment based on all publicly available information about world events and macro-
economic data. Be aware that any unforeseen news regarding a world crisis or Quantitative Easing (money
printing) by the US Federal Reserve can impact the relative strength of the US Dollar. This can affect how many
USD you can get for your GBP or EUR which in turn affects how much Gold you can afford to buy.
You can draw trendlines

across highs and extend
them forwards to indicate
potential future
levels/areas of resistance
You can draw trendlines 7

below lows and extend
them forwards to indicate
potential future
levels/areas of support
When support and

resistance trendlines are
parallel, you can identify
channels
Alongside the observation of highs/lows and support/resistance, Accendo Markets charting packages allow you to
use of some of the technical indicators most widely used by market professionals to help support their analysis of
support and resistance. These include moving averages and volume, which are discussed on the following page.
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Moving Averages
Youll notice that the below graph is more detailed than the prior one you looked at. Additions include smoothed
lines through the price which relate to moving averages of the price. These take an average of the closing prices
over a certain period. In our case we have used two of the most popular (50-day (red) and 200-day (green)).
These allow you to identify the underlying trend of the price.
The longer term 200-day moving average in Green moves quite smoothly, given that it averages a large quantity
of data. Its shorter term counterpart follows the share price more closely as it is averaging less data. When the
price moves through a moving average, this can be used as a trading signal of a change in trend. When moving
averages cross each other, these signals known as Golden and Dead crosses can also be used by traders.
Average price over the last 50-days.
Average price over the last 200-days
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Momentum
The below chart takes what you have looked at thus far one step further, adding the technical indicator known as
Momentum. The indicator measures the difference between the price on day X and the price 12 days prior,
showing when the underlying power behind an up/down move is accelerating or slowing. This can help warn you
of potential turning points. You will note that in the below graph (see blue arrows) the price kept rising (higher
highs) but the momentum indicator was registering lower lows. The price subsequently fell quite significantly.
When the two are diverging this is known as negative divergence. When they move towards each other, this is
called positive divergence. Both can lead to reversals.
Momentum measures difference in price on day X and the price 12 days prior.
Helps indicate gain/loss in underlying momentum before changes in price direction.
What you have looked at so far is merely an introduction to the trading tools at your disposal via Accendo markets
award winning trading platform. Many other indicators and education are available to help you make your trading
decisions; Relative strength Indicator (RSI), ADX (trend strength), Moving Average Convergence Divergence
(MACD), Directional Indicators (strength of up and down moves), Bollinger Bands (movement away from
average), Stochastics and many more. Used in conjunction with each other these can help you build up a picture
of whether you believe something is worth buying or selling. To test drive our demo trading platform, use the links
on the last page of this report.
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Trading Online
Accendo Markets offers you access to some of the best trading platform technology available. Web access allows
trading anytime from any desktop computer. Whats more, you can test a fully functioning demo version (see
below), before you begin trading with your own money to ensure you are fully comfortable and ready to hit the
ground running with a live account. This demo offers full charting ability and access to major RSS news feeds
such as Reuters, Dow Jones and Bloomberg, ensuring you remain in touch with company news and world events
as the news breaks.
10
Research & Information

What makes us different? Our service, a key part of which is our in-house research and Trade Ideas. Our
research team aims to provide you with the education and information you need to improve your trading returns
by drawing upon a wide range of resources and methodologies, but which is normally reserved for city
professionals. To experience why clients choose Accendo as its information provider of choice, sign up for a
research Trial (see below).
Open a Demo account Click Here

Subscribe to a Free Research trial Click Here
Apply for a Live Account Click Here
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020 3051 7461 | info@accendomarkets.

Trading Gold: Professional Secrets Education

About This Report

Choosing your trading strategy

Trading Gold: Professional Secrets Education

Trading Gold: Professional Secrets Education

Using orders (stops and limits)

Trading Gold: Professional Secrets Education

1. Technical Analysis of Stock Trends (R. Edwards & J. Magee)

Trading Gold: Professional Secrets Education

Why should you trade Gold?

Why should you trade with Accendo Markets?

How to trade Gold using CFDs

For a worked example of setting a Gold trade, see over

Trading Gold: Professional Secrets Education

The below chart identifies the 5 stages of a Gold trade

Trading Gold: Professional Secrets Education

Support and Resistance Identifying Entry and Exit Levels

You can draw trendlines

You can draw trendlines 7

When support and

Trading Gold: Professional Secrets Education

Average price over the last 50-days.

Average price over the last 200-days

Trading Gold: Professional Secrets Education

Trading Gold: Professional Secrets Education

Research & Information

Open a Demo account Click Here

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