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How to trade seasonal patterns in precious metals, today: Silver

November 20, 2019 11:30

Today, we want to focus on a bullish seasonal pattern in Silver.

After recent losses, mainly driven by this month's sharp rise in 10-year US yields (the sustainability of which is in question, since the overall economic outlook for the US hasn't brightened at all), the "re-inversion" of the 2-10-year yield curve was mainly initiated by the Non-QE-QE program announcement from the Fed.

That said, mid- to long-term Long engagements in precious metals like Gold or Silver became more interesting from a risk-reward perspective over the last few days.

With that in mind, the seasonal bullish window in Silver between November 20 - 29, which has developed over the last 16 years, puts the advantage in the precious metal on the long-side and delivers a potential trading setup.

Seasonal Pattern in Silver

The key parameter of this seasonal bullish pattern is as follows: for 13 of the last 16 years, between November 20 and November 29, Silver saw an average gain of 0.41 USD.

In the remaining three years, it dropped on average only 0.20 USD, while the maximum loss was 0.39 USD and the maximum drawdown was 0.47 USD.

Trade the Seasonal Pattern: Silver

And now the key question: how could we trade this?

Here's the plan:

  1. After identifying the profitable seasonal window, we buy Silver on the closing price of the starting date on November 20 (22:59 CET).
  2. We identify the maximum loss within the seasonal period. Then, have a look at the daily chart and the ATR(14) indicator.

    If the maximum loss is above the ATR(14) reading, round it up to the next round number and use it as worst-case-stop.
    If the maximum loss is below the ATR(14) reading, use the ATR(14) as your stop-width (rounded up to the next round number).
  3. We Look at the average gain of the seasonal pattern, and place the take profit at this distance from your entry point.
  4. If the trade is not stopped out, or it does not reach its take profit within the seasonal period, end the trade market on the closing price on November 29.

Looking at current market data, since the ATR(14) in Silver on a daily time frame is currently trading around 0.36 USD, while the maximum loss of the window was 0.39 USD, our worst-case stop will be placed based on a maximum loss 0.40 USD away from our entry price.

Meanwhile, the average gain of the seasonal pattern is 0.41 USD within this period. So, after entering the trade on the closing price of November 29, we would add 0.41 USD to get our take profit level.

Source: Admiral Markets MT5 with MT5-SE Add-on Silver Daily chart (between March 21, 2018, to November 15, 2019). Accessed: November 15, 2019, at 21:00 GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of Silver fell by 23.4%, in 2015, it fell by 12.8%, in 2016, it increased by 13.0%, in 2017, it increased by 6.4%, in 2018, it fell by 10.0%, meaning that after five years, it was down by 24.0%.

Check out Admiral Markets' most competitive conditions on SIlver and start trading from as low as 0 pips. To test Admiral Markets' offering in combination with the described strategy above register for a free demo account today and experience the live market risk-free!

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Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
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  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
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