Tracking silver prices: valuable viewpoints on managing volatility

Tracking silver prices: valuable viewpoints on managing volatility

Any investor who trades precious metals will likely confirm that silver prices can be very volatile, but while that should be a warning flag for caution, it can also mean that with that volatility, comes potential trading opportunities to exploit.

If you want to get a handle on silver prices on a regular basis, you can always get details from Money Morning, and if you are interested in trading as well as tracking silver prices, here are some insights on how you might be able to manage that volatility.

Brexit bites into silver prices

If you are trying to manage volatility, you need to try and get a handle on what might be causing prices to come under pressure and also forecast in which direction the price might be heading for the time being.

Although you could not necessarily correlate a fall in the silver price with the shock of Brexit which had an impact on financial markets in general, some analysts remain bullish about the long-term prospects for the silver price, while others believe that a correction has been coming and there may even be more downside potential.

What an event like Brexit helped to reinforce, whichever viewpoint you hold regarding the prospects for silver, is that volatility is to be expected and comes with the territory, if you want to trade the metal.

Apps to do analytical work for you

It is worth pointing out that, as you may well be one of the majority of investors who are never far from their smartphone, there are a number of apps available that are able to provide a certain level of technical analysis, allowing you the chance to make smarter decisions based on identifiable trends and figures.

Investtech is just one of many different apps and software programs that are worth looking at to see if they can give you a mathematical trading edge.

Using bottoming patterns

Using charts and other analytical data should help you to eliminate errors and identify patterns and trends that you might be able to profit from, and one way of lowering your risk is by using bottoming patterns.

You will find investors who will tell you that bottom picking is not exactly a failsafe strategy, as downward trends can last longer than expected, meaning the price could continue to fall further, despite analytical prediction tools telling you that the bottom has already been reached.

No system is ever going to be perfect but bottoms and tops, which is where you predict specific entry and exit points, can help to limit risk and lower volatility. It also helps you to see whether a price is expected to go further in either direction, allowing you the chance to make a trade that profits from that movement.

Although the concept is relatively simple, it is a trading strategy that needs understanding fully and learning, as you need to appreciate aspects of the method such as the fact that longer-term bottoms are more likely to result in greater persistence and price movements.

Finding the breakout

Breakout trading is a recognized strategy which involves taking a position at what you have identified as the beginning of a trend.

In basic terms, you are calling the starting point for a major price move. This could be sustained downward pressure on the price or conversely, the start of a strong drive upwards in value.

To find what you believe to be the breakout point involves being able to define with a degree of confidence, what you perceive to be the support or resistance level. This trading strategy is used when trading individual stocks and can also just as easily be applied to trading silver prices.

When used properly, trading breakouts can help to control and offer limited downside risk. Once prices move beyond the defined barriers, volatility is more likely to increase, but the reason why this method is popular, is simply because breakouts are very often the signal for major price trends, allowing you to trade accordingly.

Looking ahead

Some traders are still very bullish about the prospects for silver, especially those that consider the Dow is presently demonstrating a significant top.

If that call is correct, trends would suggest that silver still has some way to before prices reach a peak. The reason for this particular optimistic forecast is that silver prices peaked significantly after two previous historical peaks in the Dow.

If history does repeat itself for a third time under the same conditions, silver prices could be rising for a number of years to come.

Predicting trends and using established trading strategies might just be the tools you need to keep volatility to a minimum.

Sophie Simmons had a rather unusual upbringing in that her weekends were spent with her Grandfather who taught her all about stocks, shares and investing. It sparked something in her and as soon as Sophie was 21 she had a portfolio to be proud of. She writes about trading in gold and silver mostly for her articles which appear online.