I was recently turned on to the idea of using moving averages to finding buying opportunity in the gold and silver markets. The idea is to increase your gold and silver holdings when the metal of your choice (mines silver by the way) is trading below the 200 day (200 SMA) moving average or as it starts to trend above the 200 day SMA. This is a very simplistic way to spot the beginning of trends in the market and to make sure you have larger positions in the metal when the trend is up and lessen your positions when the trend goes down. Mind you this is a riskier and more active trading strategy than the simple yet effective long term buy and hold strategy. I am not a financial expert and do not recommend using this strategy without proper knowledge and advice from an expert. I can just sharing what I learned, and what I do. You are responsible for your own financial decisions. Let’s look at the chart to get some hindsight into buying opportunities over the last year:
As you can see, there could be potential benefit in buying larger positions in gold when the it starts to trend and stays below the green 200 day SMA line and decreasing some of your positions the farther it climbs away and above that 200 day SMA green line. In hindsight it looks like between September 2014 and now was a great time to be buying. It appears a new uptrend has been started, we’ll need to wait to see how far and how strong it will be.
Remember this is for informational purposes, if you lose all your money trading in gold & silver don’t blame me or anyone but yourself. Educate yourself, consult experts and make smart decisions!
-Gotta Fly.
Aaron