Gold Trading Strategy

Gold Trading Intraday Strategy

How to Trade Gold with a Capital of $500

Fix an average daily % target say 5% to 10% of profit and 5% loss. That comes to $25 to $50 profit and a $25 loss now works out the number of lots required to achieve that. If you keep a $5 stop loss you must be trading with 0.05 lot size only, if you have 10 lots you have only 2.5 dollar stop which gets hit in volatility. More the number of lots greater the risk. Usually, traders get more leverage and they buy more lots like 40 lots (40x$4.5=$180 for 1:400 and $360 for 1:200) the spread and brokerage takes $20 the equity is $480.

If the trades move out in the opposite direction then for every one dollar movement there is a loss of $40 if it moves beyond $10 a huge drawdown and subsequently, the account gets squared off or if there is a movement of $6 dollars in the opposite direction the account is reduced to half. If there is a stop loss of $5 the account is reduced by $200+20=$220 a huge loss of 44%. Now work out the details if you have 20 lots the loss will be % 110 a 22% loss, a 3 to 4 days of series, loss wipes out the account. So if you trade with only 10 lots that come to a loss of $50+5 =$55 loss you still have $445 dollars with you to trade the next day or another trade.
Drawdown and Gold trading Strategy

Gold Intraday Trading Strategy


 So keep in mind the lesser number of lots the lesser the risk and by avoiding huge drawdown we get more number of trading days, more number of trades, and more opportunities. Always new traders are keen on taking profits but rarely think about controlling or limiting the losses, keeping the losses under check guarantees the winning edge and automatically one becomes a profitable trader. If the trader is able to restrict losses to 5 % the trader can sustain the account for a longer time if a series of bad trades occur.

The key to success is avoiding huge losses and controlling the losses to minimum as possible so as to retain the capital to play another day. 
The best strategy to win consequently is to restrict the losses maximum to 10% of the capital.
So for a $ 500 account, the maximum loss is $50, so if you keep a stop loss of $5 then you can trade max 10 lots of 0.01 ie 10x.01x5=$50 (left out the spread for easy calculation) I would prefer a 5% to 8% loss ideally. The 10 lots you trade may not be at one go it can be split into 5 lots of .02 size but $ 5 SL order for each and every trade.

Conclusion: To prevent getting your account wiped out due to a huge drawdown always calculate the maximum percentage of loss for the account, accordingly restrict Lot size with strict stop loss.