Getting Started in Bullion - The Fundamentals
Learn the essentials of bullion trading.
*The information presents in this section is for educational purposes only. All the latest trading rules and specifications please refer to the Trading Rules for the most updated details.
An Introduction
1.Trading Hours
An important feature of the precious metals market is its 24-hour operation. The market opens at 08:00 (GMT+8) on Monday until the closing at 04:45 on Saturday (daylight saving time). Daily scheduled maintenance at 05:00 - 07:00. *Z.com Bullion's individual product trading hours may be different, please refer to "Trading Rules" for details.2. Trading Sessions (HKT GMT+8)
The 24-hour daily transaction can be divided into 3 major trading sessions:Asian Session: (Market open - 1600)
Relative to the total daily trading volume, the Asian trading volume is relatively low. Unless stimulated by breaking news, prices are generally range-bound trading. In recent years, due to the increasing demand for gold from Asian countries such as China and India, the trading volume has become increasingly active at noon every day.
European Session: (1600-0000)
Generally, the trading volume has increased significantly after the European market opened compared to the Asian session. After the ranging in the earlier session, there are higher chances of a breakthrough. Pay special attention to the daily economic data being released by the UK and the Eurozone.
American Session: (2000-Market Close)
Trading volume/price changes are the most active. When the US released economic data, usually at 20:30 (HKT-GMT+8), the volatility expanded, and the chance of breaking the early high/low is also high.
3. Long/Short Operation
Another feature of the precious metals market is that it can be traded by buying longs and selling shorts. Like ordinary stock operations, you can buy and wait for the rise; however, there are no restrictions on short-selling in bullion operations. The precious metals can be sold at any time and wait for the decline. As long as you get the right direction, you have a profit opportunity.Funding Related
4. Understand the Price Quote
Precious metals quote in USD/OZ. Gold is quoted in units of 2 decimal places. Silver is quoted in units of 3 decimal places.Example (1): If the price of gold is 1600.50 USD/OZ - that means the gold price is 1600.50 USD per ounce.
Example (2): If the price of silver is 16.960 USD/OZ -that means the silver price is 16.960 USD per ounce.
* 1 ounce = 0.3kg
5. Contact Size (A Standard Lot)
Standard lot size for gold is 100 oz / for silver is 5000 ozExample (1): If you place an order for 1 lot of gold in our MT4 trading system, which means, you are trading 100 ounces of gold; If you place an order for 0.5 lot of gold in our MT4 trading system, which means, you are trading 50 ounces of gold;
Example (2): If you place an order for 1 lot of silver in our MT4 trading system, which means, you are trading 5000 ounces of silver; If you place an order for 0.5 lot of silver in our MT4 trading system, which means, you are trading 2500 ounces of silver;
6. Margin Trading*
Margin trading originated in London in the 1980s and then being adopted by the United States, Japan, Hong Kong and other financial centers. Precious metal margin trading is based on the principle of financial leverage. The maximum leverage for gold trading in Max Online is 1:400 / the maximum leverage for silver trading is 1:200.Example (1): If you deposit USD 5,000 in trading gold, take our maximum leverage ratio (1:400) as an example, USD 5,000 deposited can be used for a trading equivalent to USD 2,000,000 in gold.
Example (2): If you deposit USD 5,000 in trading silver, take our maximum leverage ratio (1:200) as an example, USD 5,000 deposited can be used for a trading equivalent to USD 1,000,000 in silver.
*Be aware that increased leverage means increased risk.
7. How to Calculate the Leverage Ratio?
Example (1) : Deposited USD 5,000 / buy long 1 lot at 1,600 USD/OZ
- Total Contract Value
- =Buy in price x Contract size = 1600 USD/OZ x 100 OZ (1 lot = 100 OZ)
=USD 160,000 - Leverage
- =Total Contract Value / Total funds in account
=USD 160,000 / USD 5,000
=32x
8. How to Calculate the Minimum Required Funds for Trading?
Minimum required deposit = Total contract value / leverage ratioExample (1) : Minimum required deposit for buying 3 lots of gold @ 1600 USD/OZ using 200x leverage
- Minimum required deposit
- = (1600 USD/OZ x 3 lots x 100 OZ) / 200x
= USD 2400
- Minimum required deposit
- = (1600 USD/OZ x 3 lots x 100 OZ) / 50x
= USD 9600
Trading Related
9. Profit and Loss Calculation
Profit/Loss = Price difference (Entry price - Liquidation price) x Contract SizeExample (1) : Buy long 2 lots @ 1600 USD/OZ / Liquidate @ 1609 USD/OZ (with gain)
- Profit / Loss
- = Price difference x Contract Size
= (1609-1600) x 2 lots x 100 oz
= 9 x 2 x 100 = 1800 USD (Profit)
- Profit / Loss
- = Price difference x Contract Size
= (1595-1600) x 2 lots x 100 oz
= -5 x 2 x 100 = -1000 USD (Loss)
- Profit / Loss
- = Price difference x Contract Size
= (1600-1598) x 0.5 lot x 100 oz
= 2 x 0.5 x 100 = 100 USD (Profit)
10. Physical Delivery v.s. Leveraged Trading
Physical delivery
Lot size: 100 ounce
Open price: 1,270.50
Funds required: USD 127,050
If price goes up to 1,290.5
Profit (in dollars): USD2,000
Rate of Return: 1.57%
Leveraged trading (e.g. 200:1 leverage)
Lot size: 100 ounce
Open price: 1,270.50
Funds required: USD 635.25
If price goes up to 1,290.5
Profit (in dollars): USD2,000
Rate of Return: 314.84%
11.What is "Auto Closeout" / "Forced Liquidation" ?
In bullion trading, when floating positions are at a loss and the equity is below the minimum required margin level, all positions in the account will be forced to be liquidated by the system, which is called "Auto Closeout" or "Forced Liquidation".12.Auto Closeout level
Positions will be closed out and pending orders will be cancelled automatically if net equity falls below 60% of the minimum required margin.13.How to Calculate the Auto Closeout Level?
Auto Closeout level = Market price - (Free equity / Total contract value)Example (1) : Buy long 1 lot of gold @ 1600 USD/OZ with USD 2500 in the account
- Free equity
- = Total Fund - Min. required deposit x 60%
= 2500 USD - (1600 USD/OZ x 1 lot x 100 oz / 200x) x 60%
= 2500 - 480
= 2020 USD
- Auto Closeout level
- = Market price - (Free equity / Total contract value)
= 1600 USD/OZ - (2020 / (1 lot x 100 oz))
= 1600 - (20.2)
= 1579.80
Example (2) : Sell short 3 lots of gold @ 1610 USD/OZ with USD 6000 in the account
- Free equity
- = Total Fund - Min. required deposit x 60%
= 6000 USD - (1610 USD/OZ x 3 lots x 100 oz / 200x x 60%
= 6000 - 2898
= 3102 USD
- Auto Closeout level
- = Market price - (Free equity / Total contract value)
= 1610 USD/OZ + (3102 USD / (3 lots x 100 oz))
= 1610 - (10.3)
= 1620.34
Cost Related
There are no fees for opening a trading account, and there are no external handling fees when trading. The customer's cost is only the bid-ask spread (Spread) and the interest on overnight positions. However, please note that all gold trading accounts that have not traded or deposited funds within 6 months will be charged a monthly fee of $ 10.
14. Spreads
Spread refers to the difference between the sell and buy price of a two-way price quote.In bullion trading, the spread is the transaction cost for the investors. (Some brokers may apply charges on clients e.g. commission and service charges apart from spread).For example, gold trading is now 1270.00/1270.50.
In this example of gold trading, a quote of sell price 1270.00 versus buy price 1270.50, (1270.50 - 1270.00 = 0.5) 0.5 is the price spread.
