Silver trading in the FOREX market: a few trading techniques

Whether you’re investing in silver for wealth or diversification, understanding its market is first and foremost to ensure the proper allocation of your investments. Firstly, trading silver in FOREX doesn’t mean that you own the physical commodity. If you want real exposure to silver, buy bars or coins and then store them in a safe. Remember, if you can’t hold your actual metal, you don’t own it.

If you’re investing in silver via FOREX, it’s most likely that you’re in it for diversification purposes. Here are a few things that you should understand as a silver FOREX investor:

1.) It’s best to buy silver in the months from May-August, as this is when silver is at its weakest. Investors may visit BullionVault’s live price chart to see the price today, as well as the precious white metal’s price fluctuations during May – August in previous years. In May 2005, the price of silver was $7 per ounce. In August of the same year, however, silver’s price slowly increased and fluctuated at around $7.60 – $8.00. It then finally settled at $9.08 before 2005 came to an end.

One explanation that can give light to this phenomenon is the World Cup. You read that right. Surprisingly, a ball game that’s watched by billions of people around the world can significantly affect precious metal prices. UBS analysts Edel Tully and Joni Teves explain that recent data revealed that the buy volatility during World Cup is a losing one. According to them, this may seem like a groundless idea, but in reality, it isn’t as far-fetched as one might think. After all, many investors are football fans themselves so it isn’t surprising if they go on a vacation during the games.

The number of investors is more concentrated during the World Cup compared to the thinly-stretched crowd during the months outside the football tournament. If there are less fundamental events that would affect the prices of precious metals, their value would most likely to decline.

2.) The best time to buy silver is during the first hour of the New York trading session. This is when the price of silver is at its lowest. Check out the graph below and you’ll see similar graphs like this in every opening of the New York trading session for silver. There’s no solid explanation why this happens, only evidence from recent data.

3.) Don’t base your decisions on per minute price movements as these can be very stressful. Instead, base your decisions on 5 – 10 minute price graphs in order to make sound choices. Making a decision every minute is a beginner’s mistake. It’s good to keep oneself constantly in the loop with gold prices, but basing decisions on a per minute basis can lead not only to stress but also unsound trading decisions that would end in disaster. Get a good grasp of the overall picture. Study the price movements carefully and base your decisions on the overall investor sentiment.

The Asian trading session is usually steadier in terms of price action and volume. You may also take advantage of this time to either go long or short on silver.

According to data last year, around 65% of FOREX traders experienced losses. So before trading, make sure that you’re fully aware of the ins and outs of the silver FOREX market.

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August 24th, 2014 | by Victoria Meikle | No Comments