Silver Chartbook - Silver, Process Over Intuition

Summary

• Intuitively, Silver might feel bearish due to its seven months sideways range.
• But Silver is still without any doubt in a major bull run and will remain so for quite a while coming.
• What also points towards the overall interest in Silver is the increased volume within the last six months.

Most likely, you will find the sum of trades you trusted, had a hunch about, and liked, to be the losing ones. And the ones you doubted maybe even skipped taking, to be the large winners. Intuition isn’t worth a dime in trading. The only way to succeed is process. Over time, in turn, you become a good loser. If you can handle losses well, the winning trades will take care of themselves. Being a good loser is an essential skill for systems with a low hit rate where the fewer winning trades have a great risk/reward ratio. Meaning the few winners are proportionally much larger than the early cut small losing trades, but you need to cut them early. The only way to develop such a skill is to practice.

This principle is significant in times like right now where Silver (XAGUSD:CUR) and the iShares Silver Trust ETF (SLV) as well as the Sprott Physical Silver Trust (PSLV) are seeming ("say intuitively") trading sideways and might even feel bearish most of the time in their trading range. The truth however is, that Silver is in a major bull run and will be so for quite a while coming.

Market manipulation and the fact that the market itself is counterintuitive by nature make continuous entry discipline on low-risk trading especially difficult for beginning traders who try to follow their hunches.

Weekly Chart of Silver in US-Dollar, On the move:

Silver in US Dollar, weekly chart as of March 11th, 2021.

Looking at the weekly chart above, we see a steep trend leg up. Next, prices meandering through a sideways range. Significant is the latest behavior through the range from the range low to the range high, retracing only moderately through the range when bouncing from the range high to a Fibonacci retracement of 0.38, where it bounced strongly – a clear sign of strength.

Silver in US-Dollar, Weekly Chart, Supporting factors:

Silver in US Dollar, weekly chart as of March 11th, 2021.

But that isn’t all. Another weekly chart representation also shows that this Fibonacci level is supported by the round number US$25. Here we find a significant supply zone based on our volume analysis tool. Here most transactions have been happening over time at around a price level of US$25.25.

In addition the intensity of the price bounce is indicating strength. Price didn’t retest but moved strongly up for a reversal of direction.

This “stacking of odds” is part of the process to qualify entries instead of “feeling” that prices might change.

Weekly Chart, Silver in US-Dollar, Silver-Process over intuition:

Silver in US Dollar, weekly chart as of March 11th, 2021.

In conclusion, we find that the process-oriented trader has significant evidence for a trend continuation. This is especially drawn from the first leg up with a high likelihood of further advancements and a range break in the near future.

The weekly chart above shows through its regression channel why prices can quickly advance towards the upper rim (red upper channel line). There we would take partial profits based on our quad exit strategy whole prices should then increase further from there through time. Prices still near the mean (red dotted line) can also from a mathematical, statistical perspective within reason advance further. What also points towards the overall interest in Silver is the increased volume within the last six months. Shown in the red and turquoise horizontal bars.

Silver, Process over intuition:

It isn’t practice alone. Only a refined rule set for this process will make it possible to follow one’s own instruction. If there are holes where intuition can step in to make a partial decision, failure is near. Our need to be right (ego) is strong, and it will try to get its needs met. So it might try to lure you into fulfilling your hunch needs by altering money management. Don’t let your subconscious trick you into manipulating your position size because you have intuitions or hunches.

Starting with paper trading and growing slowly with a minimal position size is the best bet not to lose one’s shirt in the early years. Constant refinement of your process rules and accepting trading to be a boring endeavor while executing is the way to consistency and riches.