What do Metal traders do?
A metal trader is in short, a company that deals on a professional level with the purchase and sale of precious metals, mainly gold but also with the sale of other types of less valuable metals, but still of interest to anyone who wants to secure their savings as such. There are generally four main precious metals to trade: gold, silver, platinum and palladium.
Many forex brokers in the market offer much more than just the traditional currency pairs on their trading platforms. Metals are part of the mix and by metals, we mean assets such as gold, silver, palladium, copper and platinum. Gold and silver are commonly traded as pairs with the euro, British pound, Japanese yen, US dollar and several other currencies.
When trading metals or currency pairs, it may be important to consider a number of factors that will likely impact your trading. Metals and currencies are not the same and their contract specifications are very different.
In Menos Global Ltd., Gold is our most profitable Metal advisable by our experts and signal systems. Gold is the most popular commodity offering high liquidity, and trading it through CFDs allows significant leverage and measured risk. So if you want to trade metals, currencies or both on your platform, there are certain metrics that you may consider. These are as follows:
Contract specifications describe the unique characteristics of each asset. Contract specifications will therefore include metrics such as size of pip movement value, of one pip movement, number of units of the asset in one pip, minimum contract size, etc.
You also need to be aware of the margin requirements for operating your account if you want to trade metals. Margin requirements differ from one country to another. In the US for instance, the maximum leverage allowed by the Commodities and Futures Trading Commission (the market regulator) for currency trading is 1:50, and for options trading, it is 1:20. European brokers do not place such restrictions but certain assets such as metals are assigned much higher margin requirements than currencies. This will have a direct bearing on your trade size, risk allocation and the size of your account capital.
From what has been described above, it is very clear that any trader who will be trading a spot metal such as gold will need far more money to trade with than if currencies were to be the only assets traded on the platform. Even though many retail platforms offer reduced contract sizes on metals, the volatility on these assets means that traders need to have a solid cash cushion beyond what would have been needed for currencies.