Silver is considered as one of the precious metals that is often used as the investment commodity. There are an array of silver trading strategies out there, however, the two most common and trending trading strategies adopted by a majority of silver investors are Range Trading and Trend Trading. Whether you are a professional silver trader or you have just entered this investment realm, it is best to use technical and fundamental analysis to get a better prediction on the future silver prices. Before we discuss the strategies of silver trading, let’s have a quick glimpse at the importance and need for silver trading for investors.
Considering the tight spreads as well as high-trading volume, there’s no denying that silver is one of the highly tradeable investment commodities. As the demand for silver is relatively less than gold in the current times, silver is more volatile than other metal commodities. The surprising fact is this volatility of silver helps the Intra-day traders to use take full advantage of huge intra-day market swings.
Apart from being famous in jewellery and accessories market, silver has a plethora of industrial and commercial uses. This precious metal, which also happens to be an amazing investment commodity, is found in our daily-use appliances such as mirrors and electronic items. Silver is also used in the making of dental alloys. A major portion of the demand for this precious metal comes from industrial sectors as well as the investors. Individuals can trade silver anywhere from Monday to Friday. Let’s get started with the trading strategies for silver:
A trending market can be defined as the market that produces new price extremes frequently. Trading silver becomes much effective and easier when you comprehend the trending markets properly. Fortunately, there are multiple ways of finding the direction of a trend such as with the help of moving averages or by drawing trend lines.
As soon as you have determined the direction of the trend, it is time to move to the next step i.e. filtering the signal in the direction of the current market’s trend. You can find a plethora of tools that could be used to ascertain the buy and sell indications in the market. One such effective tool is the trend lines. Drawing trend line is one of the most common ways of identifying the trading signals. But you can also use other tools for the same. For example, Simple Moving Average, Stochastic, Moving Average Convergence Divergence, and Relative Strength Index are four crucial methods of identifying the current market trend.
Make sure that you choose the right indicator (probably the one you are comfortable with) and buy and sell the signals that form in the direction of the current trend line. The key to a perfect silver trading decision is filtering the signals and taking only the trades that generate in trend’s direction.
Also Read: Strategies for Trading the Gold-Silver Ratio
Whether it is silver or the other investment commodity, the main feature of a successful trader is his risk management decision. The better you manage your risk, the lesser the losses you may bear, and the higher the profits you earn. The best possible way to manage your risk is to use stop-losses and take profits.
As the name itself suggests, the range-bound strategy is used in the silver trading market when there is consolidation period in the market (a time when the market is likely to range-bound). It is important to note that a silver market doesn’t always follow an uptrend or a downtrend path. You may find it in the consolidation period, i.e. when the prices of this commodity move sideways. But no need to worry now! As there are range-bound strategies developed, traders can manage their silver trading decisions in the consolidation period too. The three important steps to silver trading in a consolidation period are as follows:
The moment the investor is certain about the direction of the trend and the range of the commodity, it is time to use certain technical indicators to get the signals for entering the silver trading market. Generally, the technical indicators you might need to use will depend on the silver trading strategy you have adopted. However, the two most common technical indicators that are widely used by metal traders are price-pattern and relative index strength (RIS).
Using technical indicators is the best way to find the signals for entering the silver trading market. However, it does not ensure that your investment is going to be successful. For that, you must use stop-losses and take profits.
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