Metals pair trading

I've been toying with gold and silver for pair trading and find that gold and silver trade well in certain zones but that silver can breakdown hard. The numbers seem to prove it.

I've worked in some filters to avoid silver breakdowns and the profits seem ok. Anyone else try this trade with some wisdom to chair? It's like a lot of small wins with gigantic disasters here and there.

 

Metals aren't too popular on this forum, eh? What is -the- definitive way to learn the precious metals industry? I google, and it's all end-of-the-world web sites with cheap technical diagrams.

I want to be a metals guru.

 

I've paired Gold / Silver & Gold/Platinum before with good results.

I used some historical price relationship info & then added to the winning trades.

I have not yet been able to profitably trade the pairs with only a mean reversion strategy. The pairs seem to go way beyond whats 'normal' more often than you would expect.

 

What sort of filters are you putting in to avoid silver breakdowns?

 

I'm finding the books that explain metals trading on the London Metal Exchange, to be very useful. Although LME is positioning itself as the center of the non-Ferrous metals universe, they are quietly adding steel and bretheren to their trading mix, too.

Bookstore is here: https://secure.lme.com/Shop/catalog.aspx?cid=45&c=Books+and+Publications Beware, if you buy a book there, you're going to get drilled three times. First on the price, then on the exchange rate, then on international shipping. But IMHO it's worth the expense.

 

To the OP.

Create a Gold/Silver relative strength chart. Either with excel(my choice) or thru a vendor.

Following the patterns and slope of this line can make for some interesting pairs trades.

 

I've been trading gold/silver pairs but only on an intraday basis. I helps me limit the size of the larger moves against my position by trying to get out at a $200.00 loss and never holding it overnight. It's worked well for me. I was thinking of starting a tread, but I wasn't sure there would be enough interest. If your going to to trade pairs know your exit point and put the probability in your favor.

 

Thanks!

 

Are you doing futures pairs or ETF pairs? If futures what ratio are you using Gold:Silver? thanks.

 

Only Gold/ Silver futures and I keep the ratio at one to one. I took a look at a 3:4 ratio, but the charts are almost identical.