One of the questions we hear most often is, “What does it take to be a successful trader?” Although many people look for the Holy Grail of trading that works every time, history has shown it likely doesn’t exist. Instead, George Gero, precious metals strategist, vice president, global futures, RBC Capital Markets, says nothing in life is free or easy, so you have to be prepared to work if you want to be a successful trader.
Here are five things he checks every day before making a trade. Check back next week when Gero shares more details on these five and five more in this month’s Trading 101 article.
1. Do your homework
If you want to do well during the trading session, you have to set yourself up for success before the bell even rings, Gero says. That means taking time the night before to check prices and see how the metals are trading overseas and to see how the currency pairs are holding up.
2. Look to the (far) East
Based on the trading day, the Asian markets are the first to open and first to react to any news that breaks when they are open. As such, Gero makes checking gold prices at the Tokyo Commodity Exchange (Tocom) and the Shanghai Futures Exchange a priority the night before and first thing in the morning. These exchanges also trade other metals, such as platinum at Tocom, but he focuses mainly on the gold price.
3. Business as usual in the United States and Europe
Nothing moves the markets like a good (or bad) economic report. As such, knowing what reports or economic events are due to hit the airwaves that day, week or even month is of paramount importance, Gero says, because they could affect either industrial or retail demand. A list of upcoming economic reports and key stock earnings reports is published weekly on FuturesMag.com.
4. Politics in the U.S. and Eurozone
Just as economic reports can have an effect on markets, political actions and statements can move markets. Gero gave the example of Group of Seven and Group of 20 meetings as having the potential to move markets, especially because currency exchange rates have become an important topic at those meetings. Although he says nothing of significance has come out of those meetings lately, the potential to impact markets remains.
5. Politics and threats in the Middle East
The Middle East continues to be a geopolitical hot spot. Because of the region’s abundance of oil, traders need to pay attention to what is happening in that part of the world. Gero says metals traders also need to consider the price of oil in their analysis because it can be a bellwether of the perceived strength or weakness in the economy, or a gauge of the possibility of war breaking out in the Middle East, which can affect gold’s perceived need as a safe haven.
Check back next week when Gero shares more details on these five tips and five more in this month’s Trading 101.
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