Investing in safe havens

Gold is a traditional go-to when equity markets are tanking, and has regained its poise in early 2016 due to uncertainty about US monetary policy and supply having peaked. In an environment where US interest rates are set to stay low for longer, gold becomes more attractive due to a weaker US Dollar. There are several ways to invest in the yellow metal, both directly and indirectly:

Bullion: Physical gold, which is usually priced a little above the spot price and must be stored.

Gold ETFs: An accessible way to invest in funds that track the gold price.

Gold mining stocks: Miners are a popular way for investors to speculate indirectly on the gold price.

CFDs / spread betting: Gold, ETFs and equities are just some of hundreds of markets that can be traded on CFD and spread betting platforms.

Using Stop Losses

Always be prudent to consider what you could lose on the trade before deciding whether it is worthwhile in the first place. You should always ask yourself the following when preparing to enter a position:

1. What’s the worst case scenario?
2. Just how far will I let the price move against me before calling it a day?

The idea of taking a loss is difficult to swallow, but if you’ve managed risk effectively enough then it’s perfectly feasible to bank a profit with just one good trade out of three. How? The answer is known as ‘risk/reward’ (which is actually calculated by dividing the reward by the risk).

Risk/Reward

In setting up a trade, the investor will compare the expected profit with the potential loss. The higher the number the better; if the potential profit is twice the potential loss then a 50% success rate will still make money. If it’s 3 times, then a mere 33% success rate is all that’s needed, and so on.

On its own, the use of stop losses and profit limits is possibly the simplest form of risk management. Placing a stop loss at a level at which you are happy to put your hands up and say ‘I’m out’ will protect you from the sorts of losses you may be absolutely UNcomfortable with!

Before taking a position in the markets, be sure to contact Accendo for…

• Updates – How do things look in terms of investor sentiment?
  • What’s going on in the markets and round the world?
  • News and broker updates emerge daily affecting prices.
• How to use CFDs and Spread Bets to maximise your profit potential.
• How to use the tools available to minimise the risk involved

At Accendo Markets we don’t tell you what to do. It’s your call whether you buy or sell. Our aim is to provide the help you need highlighting opportunities which may be profitable to you, the trader, and assist you in making trading decisions which can benefit from the use of leveraged instruments.

Our unique and award-winning service provides you with the help and tools you need to make appropriate trading decisions in the financial markets, both to grow and protect your capital.