XAUUSD’s movements are much larger and faster than EURUSD. Some people therefore may want to take advantage of XAUUSD’s larger/faster movements so they can profit more. But here’s my question:
Wouldn’t trading EURUSD with larger lot sizes be the same as trading XAUUSD with smaller lot sizes?
Why would anyone choose XAUUSD if they can do the same thing in EURUSD with larger lot sizes?
For instance, right this moment, looking at XAUUSD M1’s latest 300 bars, the difference between the highest point and the lowest point is: around 2500 points. Whereas the same thing in EURUSD M1 is around 154 points. So around 16 times more movement.
My point is, instead of trading XAUUSD which is probably riskier, how about trading EURUSD but increase the lot size (4 or 8 or even 16 times) to profit the same amount?
Does that make sense?
Hi, try to find information about diversification
I appreciate the answer, but I’m looking for a specific answer. I want to find out if there’s something in my question that I’m not understanding correctly. But again, I appreciate your answer. Thank you.
It makes sense to me, and it’s what I’d want to do, myself. But at the same time, there are others who would conclude the opposite, and want to trade Gold and avoid the Euro.
Different people want to do different things, for a huge variety of different reasons.
Many people (perhaps especially among more experienced traders) would want to trade both, partly (as @ProfesorPips wisely mentioned just above) for diversification purposes. With CFD/forex-trading, this is actually a pretty big deal, because all currency pairs are directly or indirectly correlated to some extent.
Some people know a lot about gold and little about the Euro (that‘s the standard “different areas of expertise” answer).
Some people have methods of trading that are highly suited to very volatile financial instruments (Gold); others have systems suited to less volatile ones that maybe don’t even trend unidirectionally for such long periods (Euro).
To some people dealing costs are so important that the significance of having the lowest the lowest spreads and commissions outweighs everything else (and they might prefer the Euro).
There are lots of different reasons underlying people‘s differing preferences, as you can see (I’ve only outlined a few - there are many more factors involved than just those readily apparent ones).
Some people like Lobster Newburg; some prefer Lobster Thermidor; some like Lobster & Courgette Fritters; others like a Lobster Curry (I think it’s usually a waste of a lobster, myself). Some are allergic to lobster but will happily eat crayfish. Some like both but aren’t really allowed by their religion to eat lobster, though they are allowed to eat crayfish. Some (I’ve heard) are even vegetarian or vegan and prefer tofu (baffling, I know - “go figure”).
But in principle, I’m on your side of the debate (if it is a debate?) and would rather trade EUR/USD with a bigger position-size than have anything to do with Gold, myself. I wouldn’t know what I was doing at all, with Gold, and the volatility would scare me off.
Wow, thank you for this answer. So I’m not crazy after all. Good to know.
It all boils down to personal preference.
For example i just prefer to focus on one pair at a time instead of monitoring multiple pairs and confusing myself.
But yes, due to higher volatility, I personally use a smaller lot size for XAUUSD, JPY pairs compared to other Major currency pairs.
For example, while trading manually i try to stick to 1 lot per position for every $20000 for most major pairs as opposed to 1 lot for every $50000 for XAUUSD.
Its upto you to decide the proportion of lot size you wish to use for any given pair. There is no hard and fast rule to anything in trading.
You already answered your own question my guy.
Because it’s faster to reach profit, more volatility…
Although it is risker due to its wild nature. Those that are confident in the strategy, know how to adapt their game around it
Yes, I’ve been trying to take advantage of XAUUSD’s volatility for a while, but honestly mentally, it’s been too much for me. I’m going to start trading EURUSD instead from now on.