What Is XAUUSD? Spot Gold vs Futures vs CFDs: How to Trade Gold Online the Right Way

Executive summary

Most retail traders trade gold as XAUUSD, a quote for 1 troy ounce of gold priced in US dollars. You are usually not buying physical gold. You are trading a derivative product linked to the underlying gold market. To trade gold online, you will see spot gold, gold futures, gold ETFs/miners, and CFDs on XAUUSD. Futures are central to price discovery, but CFDs are practical for beginners because sizes are flexible and there is no contract expiry handling. This lesson helps you choose the correct product for learning and understand the main costs: spread/commission and overnight financing.

Learning objectives

• Define XAUUSD and the difference between spot, futures, ETFs, and CFDs
• Choose a practical beginner product and understand costs
• Understand trading hours and liquidity for gold

Institutional workflow

Product choice workflow: instrument -> contract specs -> costs -> demo account -> execution practice.

Core lesson

Most retail traders trade gold as XAUUSD, a quote for 1 troy ounce of gold priced in US dollars. You are usually not buying physical gold. You are trading a derivative product linked to the underlying gold market.

To trade gold online, you will see spot gold, gold futures, gold ETFs/miners, and CFDs on XAUUSD. Futures are central to price discovery, but CFDs are practical for beginners because sizes are flexible and there is no contract expiry handling.

This lesson helps you choose the correct product for learning and understand the main costs: spread/commission and overnight financing.

Professional note

Your edge as a beginner is executing a simple plan with consistent risk. Reduce mistakes first. Profit is a byproduct.

Practical example (quick)

• Identify the level or condition
• Wait for confirmation on your trading timeframe
• Define stop at structural invalidation
• Size from stop
• Execute and journal in R

Concept deep dive

When people search "how to trade gold online", they usually mean trading XAUUSD through a broker platform. The key is to understand what your platform is actually offering. In the institutional world, gold pricing is heavily influenced by futures markets, with spot and derivatives linked through arbitrage and liquidity provision. In retail, most platforms offer a CFD that mirrors a reference price, plus a spread and financing.

The product you choose changes your learning curve:

• Futures are transparent and standardized, but contract size and margin are bigger and you must understand expiry.
• CFDs are flexible and accessible, but costs vary by broker and pricing is internalized.
• ETFs/stocks add equity risk and market-hours constraints.

For beginners, CFDs on demo are practical because you can test execution and risk control with small sizing. The goal is to learn process, not to find the perfect instrument.

Worked example

You compare two setups: (A) a CFD account with 0.01 lot minimum, and (B) a futures micro contract with fixed tick value. You realize that with your current small account, the CFD allows you to risk $10 with a wider stop, while the futures contract forces a bigger risk per tick. The correct decision is to choose the product that lets you control risk precisely, even if the "institutional" product sounds more impressive.

Cost checklist (must know)

• Typical spread on XAUUSD during liquid hours
• Commission model (if any)
• Overnight financing or swap
• Slippage behavior during news
• Minimum lot and contract size definition

Practice drills

• Open your broker's contract specs and write down what 1.00 lot represents.
• On demo, open a tiny trade and observe PnL for a $1 move.
• Note the difference in spreads between London-New York overlap and late session.

Glossary

• Spot: cash reference price for immediate settlement.
• Futures: standardized contracts with expiry.
• CFD: contract for difference; broker derivative tied to price.
• Swap/financing: cost (or credit) for holding positions overnight.

Implementation worksheet

Product decision: the beginner scoring grid

Score each option from 1 (bad) to 5 (good):

• Can I size risk precisely with my account size?
• Are costs transparent (spread/commission/swap)?
• Can I trade the hours I need?
• Is execution stable during normal conditions?

For most beginners, the best answer is a demo CFD because it lets you rehearse risk control and execution without contract expiry issues.

Contract spec checklist (write this down)

• What does 1.00 lot represent (ounces)?
• What is the PnL impact of a $1 move at 1.00 lot?
• What is the minimum lot size?
• Typical spread during London-New York overlap?
• Swap cost per day for holding overnight?

Mini exercise

Open a 0.01 lot demo position and record:

• Spread at entry
• PnL after a $0.50 move
• PnL after a $1.00 move

This makes the contract real.

Checklist you can use today

• Calendar checked and event risk understood
• Levels or conditions defined before entry
• Stop-loss placed at structural invalidation
• Position size calculated from stop distance (risk in dollars)
• Order type chosen intentionally (market/limit/stop) and bracketed
• Trade logged in journal with R risk and plan notes

Common mistakes to avoid

• Not understanding product costs, trading thin liquidity, overusing leverage.

FAQ

Q: What is XAUUSD exactly?

A: XAUUSD is gold priced in USD per ounce. Retail platforms usually offer it as a CFD.

Q: Is it better to trade futures or CFDs?

A: Futures are the benchmark, but CFDs are practical for beginners. Learn on demo first.

Q: What costs exist when trading gold CFDs?

A: Spread/commission and overnight financing are typical.

More questions beginners ask

Q: Do I need a lot of money to trade gold?

A: You need enough to size risk properly. If minimum lot size forces high risk, use demo or a broker with smaller sizing.

Q: Is gold better than forex for beginners?

A: Gold can be simpler because it is one instrument, but it can spike hard around news. Choose what you can manage with structure.

Q: Can I hold gold trades overnight?

A: You can, but you must understand swap/financing costs and event risk. Beginners often learn faster with intraday or swing plans first.

Quick quiz

1. What is the main decision framework taught in Lesson 2?
2. What is one checklist item you must follow before every trade?
3. What is the most common mistake highlighted in this lesson?
4. What is one practical task you can complete today to apply this lesson?

Practical assignment

• Apply the workflow to a fresh chart review (no trading required).
• Write a 5-line summary in your journal focused on rules, not predictions.
• Save one screenshot that shows your levels/plan/order structure.

Key takeaways

• Trade a process, not a feeling.
• Define risk before you define reward.
• Repeat simple rules until they become automatic.