Gold trades on forex platforms as XAU/USD. That is the price of one ounce in US dollars. It moves faster and costs more per trade than currency pairs, so size it smaller.
How gold is priced
A gold quote looks like 2,412.50. One standard lot is 100 ounces. So a 1.00 dollar move is worth 100 dollars per lot.
| Price move | 1.00 lot | 0.10 lot | 0.01 lot |
|---|---|---|---|
| 1.00 dollar | 100 dollars | 10 dollars | 1 dollar |
| 10.00 dollars | 1,000 dollars | 100 dollars | 10 dollars |
Brokers call different steps a “pip” on gold. Ignore the word. Think in dollars of price.
The stop loss you use on EUR/USD is too tight for gold. The lot size you use is too big.
How far gold moves
On an ordinary day, gold often moves tens of dollars between high and low. On news days it moves more. A 0.10-lot trade can swing by hundreds of dollars in one session. Look at the last ten daily ranges on your chart before you set a stop.
Why gold moves
- The US dollar. Gold is priced in dollars. A stronger dollar usually pushes gold down.
- Interest rates. Gold pays no interest. When rates rise, gold often falls. US inflation data and Fed meetings matter most.
- Fear. In wars, bank stress or political crises, money runs to gold.
Cost of trading gold
The spread on gold is often 0.20 to 0.40 dollars on standard accounts. On 0.10 lot that is 2 to 4 dollars just to open. It widens during news. Swap overnight is also higher than on major pairs. Scalping gold for a few cents is very hard.
Example: sizing a gold trade
Account 2,000 dollars. Risk rule 1 percent, so 20 dollars per trade. A signal says:
XAU/USD BUY
Entry: 2,405.00
SL: 2,395.00
TP: 2,425.00- Stop distance: 10.00 dollars of price.
- On 0.01 lot, a 10.00 move is 10 dollars. On 0.02 lot it is 20 dollars.
- Your limit is 20 dollars. So the maximum size is 0.02 lot.
- The target is 20.00 away. Potential gain is 40 dollars. That is 1:2 risk to reward.
Had you opened 0.10 lot instead, the same stop would cost 100 dollars. That is 5 percent of the account in one trade.
Mistakes to avoid
- Using the same lot size as on currency pairs.
- Setting a stop 2 or 3 dollars from entry. Normal noise hits it.
- Trading through US news without knowing the time.
- Holding big positions over the weekend. Gold can open with a gap.
Gold rewards the same discipline as any pair, only faster. If lots still confuse you, see the lot sizes guide.
Questions, answered plainly.
What does XAU/USD mean?
XAU is the code for one troy ounce of gold and USD is the US dollar, so the quote is the dollar price of one ounce.
How much is one pip on gold?
On most platforms a 1.00 dollar move in the gold price is worth 100 dollars per standard lot, 10 dollars on 0.10 lot and 1 dollar on 0.01 lot.
When is the best time to trade gold?
During the London and New York sessions, especially around US data releases, when most of the volume comes.