Investing in silver requires a trader to employ different tactics to not only survive longer in the markets, but also to realize decent returns from their trades. As such, identifying different market behaviors and devising ways of capitalizing on them is a skill that a reasonable investor should possess.
Different market conditions attract different types of investors, and there is little money-making opportunity that goes to waste in the market.
To fully understand the approach you will employ to make the most of an opportunity, it is important to learn the different strategies that have proven to work over time. The following trading approaches have worked for thousands of traders, helping them grow their investment portfolios significantly.
Day Trading (Swing Trading)
Silver is tradable both in its physical form and in form of Contracts for Difference, CFDs. The CFDs are traded through brokerage firms (on their official trading sites) and other regulated financial institutions like banks.
However, physical silver requires a lot of patience and usually relies on the silver prices going upward. Therefore, the best time to buy silver coins in Rochester MI is when the prices are signaling an upward break, or are recovering from a severe bearish movement in the markets.
Conversely, CFDs allow traders—especially day traders—to capitalize on both bearing and bullish market conditions.
The prices of silver are very volatile, but quite lower compared to other precious metals like gold. Intrinsically, the frequent price movements present multiple money-making opportunities for a swing trader.
Leverage Trading
By allowing leverage, registered brokers have made it possible for every kind of investor to participate in the market regardless of their trading capital.
Buying silver requires a large sum of money upfront, to which most light investors have limited access. Leverage allows the trader to trade lots a few hundred times more than the amount they have in their trading accounts.
Risk appetite and risk management criteria are the significant determinants of how well the leverage trading tools work for the investor. A good strategy is one that has significant consideration for risk, particularly one that is conservative.
However, if you greedily misuse leverage and invest without proper risk assessment, you will likely wipe your accounts clean if the trade goes against your prediction.
Breakout Trading
If silver prices follow a bullish or bearish trend for a while, the market will soon exhaust the momentum and reverse the price movement. However, the prices initially stay within a certain range, which often signals the direction in which they are likely to move.
When the market pressure forces the prices to move past the range, it is time to jump in and make your bid. The breakout trading capitalizes on the price momentum built up by market pressure once prices are out of the range zone.
Breakout trading allows the trader to make sure bids and reduce swaps fees and commissions accumulated by open trades that stretch over a long period.
Ratio Trading
The market has various commodities of the exact nature, such as silver and gold, whose prices move with the same pattern and are influenced by similar market conditions.
As such, ratio trading allows the trader to analyze one commodity and invest in a similar one once there is movement.
Therefore, if you want to invest in silver, a spike upward in gold prices is an excellent indicator that you should buy more silver because the prices will soon catch up.
Pair Trading
Pair trading has a similar working concept to ratio trading. However, in the case of pair trading, the prices of the two comparing commodities move in the opposite directions. For example, silver prices are likely to move up with the bearish movement in the price of a commodity such as oil.
Range Trading
Market prices for every commodity have a maximum point in each direction that marks the end of momentum exhaustion.
Therefore, a trader is able to predict the movement, bearish or bullish, as the prices approach the exhaustion point respectively.
Conclusion
Trading silver requires a combination of a few strategies in order to ensure that your trades yield high returns. As such, the trading strategies discussed in this article will help equip you with the tactics needed to profitably trade silver in the markets.
