Sunday, March 11, 2012

Swing trade the PM markets? Can't beat them, join them?

Does it make sense to join the cartel to short the PM markets to make some US $ fiat?  It depends upon one's thoughts on the USD going forward.

I'm sure most people with debt would like it to pay it off and live debt free.  (Pay off that mortgage, car payment, visa card, etc...)  You'll have to do it with USD's, not Gold or Silver.  Although both of those PM's are increasingly becoming accepted as currency.

It is not as easy as it sounds, but one can defiantly make some money (USD fiat) by playing the swings in the PM markets.  Most traders like volatility as that is the way they make money, by either going long or short for specific periods of time.  If one just swing traded the run up in the Silver market in 2011, they would have done quite well.  For those that purchased in January and held to the end of December, they virtually had zero gain.

Swing trading long when either Gold or Silver is producing higher highs and higher lows.  And on the other side of the coin, shorting when Gold or Silver is overbought as seen with the RSI or Slow Stochastics indicators. Sometimes the cartel selects a certain Fed speech to initiate the raid, I'm sure there is someone that has collected data on this somewhere.

Having both long term and short term investments may be the way to go for some people.  Most should have a certain percentage of their PM allocation in the physical metals.  Silver can be used should the USD completely collapse. It is possible, but I do think that the government will step in at some point and peg what's left of the USD to Gold.  Another long position can be with solid mid and senior miners that are cash flowing and paying a dividend.  Newmont is among the leaders in this sector.

Outside of the long term positions, short / mid term trading can be done with the ETF's.  I know there are those that will not purchase certain ETF's because they cannot prove that they have all of the metal that the prospectus states.  I personally do not believe that they will be diverting from the metals price anytime soon and can be checked easily by over lapping the charts.  Most people will run a stop loss or a trailing stop when trading the ETF's which is the safe way to play them.

One problem with swing trading - It take a lot of technical analysis and TIME.  Something that most people do not have enough of.

Swing trading the miners as a group can be done with GDX, GDXJ or SIL for the Silver miners.

Disclosure: I am currently long on SIL, Global X Silver Miners Index.  I have no position in GDX or GDXJ at the time of this writing.

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