Harvesting Profits From Weak Hands in the Silver Market

In financial market jargon, those investors described as having “weak hands” typically means that they cannot hold onto a position they have established for very long if it goes against them substantially.

This term is often used to contrast such investors to those with “deep pockets” who can instead afford to take deeper drawdowns in their portfolio before they feel the need to exit their positions.





Weak Hands Make for Easy Profits

The participation of individuals with weak hands in a market like silver’s are sometimes seen by the larger and more unscrupulous traders as providing the opportunity to make quick and easy profits.

This is especially effective if the weak handed traders’ stop loss levels can be reasonably deduced by having an understanding of how trading systems tend to operate based on technical analysis, for example.

Their large trading size and deeper pockets often allows the big market makers and players to temporarily push the market through key support or resistance levels in order to trigger the stop loss orders placed by smaller traders who cannot afford to run losing positions very long.

Some of these large traders are even working stop loss orders for weak handed clients, so they know exactly what level or levels need to trade in order for their contrary positions to earn extra profits when the stops are triggered. The conflict of interest in such situations seems considerable.

Characteristics of Silver Traders With Weak Hands

Weak handed traders tend to share a set of common characteristics. For example, many of them come into the silver market:

1. With an incorrect view of the fundamentals for silver and a lack of understanding of the price discovery mechanism.
2. Over-leveraged by using silver options and trading futures on a margin basis.
3. Having only entered the silver market during this past year and without having the advantage of being able to scale into their positions over the longer term at better prices.
4. Attempting to time the market in vain, while being hopelessly short sighted in terms of their memory of market events and past levels.
5. Underestimating the power of the manipulation used to keep the silver market at irrational price levels.
6. Only invested in silver derivatives and paper, rather than in the intrinsically valuable physical precious metal.

Weak Hands Get Burned Quickly

Unfortunately, the majority of weak handed silver investors will enter the market and get burned right away, often never to return.

One can only imagine the howling among the weak hands had the Dow suddenly dropped 200 points in one minute, just prior to the NYSE open. Fat finger allegations would be rampant, and cries to nullify and forbid algorithmic trading would be demanded.

In contrast, the oppressed silver market has heard only dead silence from the CFTC, which is now celebrating its fourth anniversary of doing nothing about the ongoing silver market manipulation that the regulatory commission has been repeatedly informed of.

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I first began investing in silver about 20 years ago using a margin account. I lost a portion of the investment due to the pattern suggested in this article--my …

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