Silver Chartbook – When It Counts (Commodity:XAGUSD:CUR)


When it counts

It always counts! That’s the problem. There is never a day off. Michael Jordans’ secret was to play each game as if it was his last. A consistent eagerness to win. This got him into a lot of trouble with management where political, strategic, and resource allocation decisions are made. In trading, Jordan would have been a champion as well. Since individual trades are meaningless and random in the outcome, while sample size trading, thinking in probabilities, is everything. But that requires consistent execution. You can´t think after a string of losers the next trade to be a huge winner or a huge loser and act differently. You simply need to execute focused and unemotional. Sounds easy? Far from it. When it counts.

There are no sick days, there is no playing hooky – you can’t take a day off or allow yourself to slack otherwise you skew the outcome of your game. Rest assured if you make mistakes they are always made at exactly the worst time.

Silver, Daily Chart: Cashing In

Silver in US-Dollar, daily chart as of August 5th, 2020.

On Wednesday, August 5th we cashed in our recent silver (XAGUSD:CUR) reload trade runner (see our quad exit strategy) triggered by an intra-day double top. With an entry on 7/28/20 at US$22.60 and an exit at US$26.95, this runner generated a profit of 19.25%.

We are still holding runners from entry levels of US$11.97 (3/18/20), US$12.52 (3/23/20), US$14.01 (3/31/20), US$13.95 (4/1/20) and US$19.33 (7/17/20). Without this additional exposure, we would have not exited this specific position. Due to the fact of Silver being in an extended up move at these levels which increases total position exposure risk versus runner reward, it was sensible to lighten the load. This frees capital for reentries at lower price levels.

However, we have not sold any of our physical Silver holdings (e.g. PSLV)! Even though only talking partial exits here, the complexity of trading comes to the forefront. It illustrates that one always has to step up when it counts. And it always counts.

Silver, Daily Chart: Extended Move Struggles

Silver in US-Dollar, daily chart as of August 7th, 2020.

We post all our entries and exits live in our free telegram channel and, typically, worries come alive within the group when moves are extended. Specifically where to exit and even more where to get in again. Speculation is high when and how deep retracements might be.

Opposing principles are at work:

  • from a trend perspective, one has a directional advantage and can expect far more shallow retracements since greed steps in aggressively and buys every dip.
  • from a mathematical perspective the further away from the mean and extended a move the larger the retracements and a return to the mean

These aren’t the only forces in play but it shows again that there is no time for debate and guesses. It counts especially in these times of friction and emotions triggered to perform rule-based and clear-headed.

Your choices are:

  1. taking partial profits (since a larger retracement might be expected)
  2. enter a reload trade at a low-risk point of a sideways channel in a smaller time frame with smaller position size (the market holds and doesn’t provide a larger retracement)
  3. enter a reload trade at a low-risk point of an average or typically larger retracement

What we do not encourage is breakout trades as those typically tend to be higher risk – especially in extended moves as we are seeing in Silver right now.

Also, we do not encourage stop adjustments since they typically underperform target exits in extended moves. In this case, a stop on a runner position should be generously wide to sustain a large retracement.

Silver, Weekly Chart: When it counts, Forecast

Silver in US-Dollar, weekly chart as of August 7th, 2020.

Intuitively it might feel that the precious metal sector is overbought and due for a correction. This might be the case in a typical environment but with fundamentals pointing towards a future littered with crisis scenarios, one shouldn’t make a bet on this. As such we discourage for reducing entry options only to large retracement scenarios. Many expect as such from a typical seasonal approach and other usual trading behaviors of Silver. We dare to take a stand that we do not find ourselves in a typical cycle of Silver. Therefore, we rather focus on low-risk entry points of temporary sideways channels.

Being flexible is one of the aspects to be prepared when it counts. It is imperative to have various entry approaches.

When it counts

It magnifies when it comes to exits. There we are so strongly conditioned to do instinctively the absolute worst. Cashing in too early and trailing stops too early. You need to have your routines down and cultivate an especially good exit strategy both from a psychological perspective as well as a well defined strategic approach. Our quad exit strategy comes in very handy if your own system development hasn’t come to a satisfactory stage just yet. We also suggest a multi-dimensional trade approach like you can observe with the various entries mentioned above, where runner positions are now in the triple-digit percentages. Trading various time frames and various trades at the same time allows for choices both in entries and exits. Resulting in a toolbox that accommodates the variability of the complex markets.

Performing each time when it counts (consistently!) might be the most defining aspect why Michael Jordan is the only billionaire among millionaire NBA players.

Disclosure: I am/we are long PHYSICAL PRECIOUS METALS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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