5 Silver Trading Strategies to Boost Your Profits

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As discussed in the 'Key Fundamental to Trade Silver Like a Pro' article, silver offers tight spreads and high trading volume. It is one of the most popular tradable commodities due to its perception to hold more economic value and thus categorized as a safe-haven asset. You might be asking yourself, "What about gold?" 

Both silver and gold are highly correlated. As a result, investors and traders have often sought refuge in silver as an inflationary hedge and long-term investment during periods of high volatility, thus increasing its safe-haven appeal. In addition, silver has an inverse relationship with the US Dollar, making it an attractive investment for the purpose of portfolio diversification. 

Whether you are a newbie or an expert silver trader, this article will add to what you already know and boost your profits while trading silver. 
 

Silver Trading Strategies

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There exist varieties of strategies for silver trading. However, it is vital to choose and use only the strategy that aligns with the market conditions at a particular time. For example, a range trading strategy can only be used in a ranging market. This calls for you to be able to identify different market conditions to know which strategy to use.

Range-bound Trading Strategy

Range-bound trading strategy has three ways that you as a trader should follow:

 

1. Know the range: You have to draw your support and resistance zones to enable you to identify a range in the silver market. Best use the line chart while drawing your zones.

 

1. Clarify your signal: The range can be tricky to trade most of the time. However, if you identify a true range, then you should strive to buy at the low of a range and sell off at the high of that range. Be watchful for a breakout.

 

1. Risk management: As a pro silver trader who wants to boost profits, risk management is your best friend while silver trading. It will help you stay protected in case of a breakout while trading the range. 

 

There is always a risk in any business, and the silver trading business is not an exception. However, following the approved steps while range trading will put you above any traders and get you profitable, especially when you apply effective risk management. 

Trend Trading Strategy

There are three steps you will have to follow to trade silver effectively and boost your profits:

 

1. Determine trend direction: This is probably the most important skill you can acquire if you want to trade the silver trending market. A trending silver market is volatile with a series of higher highs and higher lows for an uptrend and Lower lows and lower lows for a downtrending silver market. 
   
   Ensure there are at least two touching points to confirm an uptrend or a downtrend. It might sound easy to trade the trends, but identifying an appropriate time frame might be another task. If you are an intraday trader, you'll have to use lower time frames to draw, confirm and take your silver traders. Make sure you conduct multiple timeframe analysis to increase your bias toward taking a trade in a given direction.

 

1. Filter your signals: Once you have identified a trend direction, the second most important step is identifying entry signals. You can use technical indicators to guide you. For example, the RIS (Relative Strength Index) can be helpful as it shows when a commodity is oversold or overbought.

 

1. Stop-loss and Take profits: No traders want to see one trade wipe their account to zero, and none wants to stay long enough without plans to take what the market provides. You are in this business to be profitable. Applying good risk management strategies and managing yourself after every trade you take is powerful just as following your plans.

Purely Technical Indicators

The strategies discussed above focused on using chart patterns and technical indicators to help traders identify potential points of interest. While not guaranteed, it can help you as traders identify high-probability areas that have previously proven to be important.

Although there are hundreds of indicators, each with its own characteristics, using just one or two simple indicators is frequently sufficient.

The moving average (MA), relative strength index (RSI), moving average divergence/convergence (MACD), and stochastic are four effective indicators used by both novice and experienced traders. You can learn how to use these indicators for profitable silver trades effectively. 

Scalping

We all have different personalities, and you as a trader should embrace your personality by copying another person's trading style. You should embrace the style that best suits you. For example, do you feel like you want your trading to look like a soapbox derby? If yes, scalping might be the best suit for you. 

Scalping can be defined in its simplest form as ultra-short-term day trading. While scalping, you are looking to get in the market and out in seconds, if not minutes. Sounds good making $10 per second, right? 

However tempting it might get, you should never indulge in it for the money if it does not suits your personality and trading style. The goal of scalp trading silver is to make small profits over a given trading session.  

Breakout and Reversal Trading Strategies

Breakout and Reversal Trading strategies are less reliant on holding times. Instead, it's more to do with market conditions. Silver breaking through a previous key resistance level is known as a breakout.

Consider silver has never traded above $200 before suddenly surging to $205 on heavy volume. Breakout traders may be interested in entering such a market. Breaking through a resistance level can indicate that the silver market is rallying due to the aforementioned reasons.

On the other hand, Reversal trades look for a silver market trend to change. Perhaps silver had a huge run-up but then stalled. Traders are beginning to short silver for some reason. This could result in a trend reversal. Reversal traders look to profit by going short or buying the dip as the silver price falls.