Trading gold (XAU/USD): the complete guide

Gold is one of the most heavily traded instruments after EUR/USD, and also the one that does the most
damage — almost always for the same reason: the position size was calculated wrongly.

1. Three numbers to know before anything else

• 1 lot = 100 ounces.
• A $1 move in the gold price is $100 per
  lot.
• The daily range is typically $20–40, which is $2,000–4,000 per lot.

Which is why 0.5 lots of gold is not a small position. At an average daily range, a 0.5-lot position swings
$1,000–2,000 in a day — far too much for most personal accounts.

2. Sizing it correctly

Lots = Amount risked ÷ (Stop distance in dollars × 100)

A $5,000 account, 1% risk = $50, a stop $8 away in gold price:

50 ÷ (8 × 100) = 0.0625 lots, rounded down to 0.06.

That number looks very small, and that is exactly right. If the formula says 0.06 and you open 0.5, you are
risking eight times the plan.

3. Cost structure

• Spread — usually 15–35 cents on a standard account, which is $15–35 per lot. Far wider than
  a major currency pair in money terms.
• Swap — usually negative on both sides, around −$15 to −$45 per lot per night. Triple on
  Wednesday.
• Slippage — gold slips more than currency pairs, especially around US data.

For anyone holding gold for several days, swap is usually the
largest single cost, well ahead of the spread.

4. What moves the gold price

• Real interest rates — the strongest factor. Gold
  pays no interest, so rising real rates make it less attractive.
• The dollar — usually inverse, but not absolutely.
• Haven demand — strong and fast, but usually short-lived.
• Central bank buying — a background force that shapes multi-year trends.

5. Hours

Gold is most volatile during the London and US sessions, roughly 08:00 to 17:00 UTC. The
Asian session is typically listless with a wider spread.

Note in particular that gold reacts sharply to US inflation and employment data, released at 12:30 or 13:30
UTC.

6. Four practical rules

• Always size by formula, never by estimate.
• Use a wider stop than you think. Gold moves; a $3 stop is close to certain to be swept by
  ordinary daily noise.
• Prefer to close within the day if the strategy allows, to avoid swap.
• Reduce size around news, or stay out
  entirely.

At the volumes gold traders tend to accumulate, cost per lot is worth watching month by month — and a
volume-based rebate returns part of it whether the trade won or lost.

This article is for information only and is not investment advice. Conditions and fee levels are published by the brokers and can change at any time — check with the broker you actually use. Leveraged forex and CFD trading carries a high level of risk and can cost you your entire deposit.