Welcome to the age-old problem of trading and investing. Markets happen when buyers meet sellers and start talking about The Deal. What will take for this? What do you want for that? Buy this for your spouse! We’ve all been there, and it’s rather fun.
But there is a serious side when people are investing their hard-earned money, trying to help insulate their futures against tidal waves of uncertainty. So when equally-unknown “experts” are competing for your ear, mind, and money, it helps to keep your wits about you. Here are our suggestions for keeping cool amidst the onslaught of voices.
First, educate yourself. Learn the basic math of trading and investing. Quite often just understanding simple things like “if it goes down 50% it has to then grow 100% to recover” will help you sort out the wheat from the chaff. (And by the way, going up 100% is usually a lot harder than dropping 50%.)
Then figure out what kind of trader or investor you are. There are many schools of thought in both trading and investing. One or more of them will fit your personality. And when something fits your personality you don’t fight it as much, and your life simplifies. Are you more of a day trader? Or are you long-term stability, buy-once-and-forget-about-it kind of person? Once you figure that out – and it can take a few rounds of exploration (read: losses, sigh) – then learn from the masters of that kind of trading. Or investing. Whichever it might be.
Next, start small. Never bet the whole farm on one trade – unless “the whole farm” means your first $100 trade. Even than – can you do 2 trades for $50? Risk management is, unfortunately, one of the last things most traders learn, and it really should be about the third thing they learn about.
What has this got to do with silver, you ask? Well, as we alluded to in the beginning, right now there is starting to be some convergence of opinions about silver. Some are saying silver will keep running up, others are looking for a correction. Which do you believe? And what should you do?
Your friendly Gold Enthusiast would say it depends on what kind of trader you are. If you’re more of a short-term or day-trader, you’re probably already trading silver on its peaks and drops. Because short-termers have to trade what’s moving, and in case you haven’t noticed, silver is MOVING.
If you’re a long-termer, you might have bought some silver a while ago while it was low, and you’re looking at whether this is the peak. A wise long-termer might be looking at the chart today and thinking “Where do I put my stop to protect profits in case silver drops out?”. That’s not usually a bad thought for anyone, by the way.
Your approach to trading should dictate your thought process at any given price and direction for any given trade, short-term or long-term. After all, the only difference between a trade and an investment is the length of time you’re holding it. Both traders and investors face the same market and have to answer the same basic questions.
For this Gold Enthusiast, silver is still holding pretty strong, and we’re only starting to look at possible stops should it drop out. If you’re not in silver yet, use your trading method to decide where you “should” get in, and watch for that point.
Plan your trade, then trade your plan! That’s how you stay sane in the markets, no matter what your approach is.
And Hint Hint: Always read the disclaimers.
The Gold Enthusiast
DISCLAIMER: No specific securities were mentioned in this article. The author is long the silver sector via small positions in PAAS, SVBL, and AGQ. He may sell the AGQ position if SLV closes below 14.95 for reasons discussed in this article, but has no intentions of trading the other positions in the next 72 hours.
About the Author
For 30-plus years, Mike Hammer has been an ardent follower and often-times trader of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, I’ve taken great pride in teaching others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.
The iShares Silver Trust (SLV) was trading at $15.39 per share on Tuesday morning, up $0.04 (+0.26%). Year-to-date, SLV has declined -3.75%, versus a 12.40% rise in the benchmark S&P 500 index during the same period.
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