Silver as represented by SLV moved back above 37.72 (which was a breakout point) and is now trading at 39.10. Yesterday silver began a bit of a swoon because Europe was a bit quieter and the sense was growing that the folks in Congress will be acting like grown-ups and pay their bills on time. Take a look at the 15 minute chart and then I’ll comment. PLEASE CLICK THE CHART TO ENLARGE IT.
(Chart from FreeStockCharts.com. It’s a great site to look at these shorter term intraday charts and is brought to you by Worden Brothers. )
The SLV is a bit above the point I printed the chart above. The SLV ETF has pulled back a couple of times, dipping below the moving average shown three times on the way up as indicated by the green arrows. This shows you why you need to either:
1. Trade out AND then get back in on the recovery, which takes a lot of trading time.
2. Allow for the pullbacks as part of the acceptable “noise” in the chart.
What I do is to examine the volatility for anything I am buying and account for that level of volatility before setting up a stop loss. If a stock or ETF drops 1% regularly in an uptrend, it pays to have your stop be somewhat greater than 1% if you intend to buy it. Otherwise, you’ll have to be very precise in your timing. But do decide in advance where you will exit. I know that some of you find that tedious, but your ability to make money in the markets is not determined just by entry points; it is greatly effected by your exit points. They can neither be too tight or too wide or you will likely destroy capital.
Print out or bookmark my “Buying checklist” if you have never seen it and go through the bullet list at the bottom before buying anything at all: The Must Ask Questions Before You Buy
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