How To Trade Silver
Welcome to Trading Brokers step by step guide to trading silver online. Here you will find an easy to understand explanation of silver trading. This includes how to trade silver online, what you need to trade silver and how to open a trading account with a broker so that you can start trading silver online today.
Maybe you have heard of silver trading online or through a friend. Perhaps you are looking to trade and are curious about the different options available to you. Whether you are looking to speculate, invest or just learn more, this guide on how to trade silver can help you along your journey.
History of silver
Throughout history, silver has been synonymous with currency and has been regarded as a form of money and store of value for more than 4,000 years. The reason a British pound is called a pound is because it used to be the equivalent to a pound of silver. The words for silver and money are exactly the same in an impressive 14 languages.
By its very classification as a “precious metal”, silver finds itself in a small group of valuable commodities that includes gold, platinum, and palladium. This beautiful white metal has always been in demand because of its unique characteristics and relative scarcity. While demand for silver has been constant, prices can fluctuate frequently.
How does silver trading work?
One of the most popular ways to trade silver is via CFDs (contracts for differences). These financial instruments allow traders to speculate on both rising and falling prices without actually owning the underlying asset which is silver in this case. This can be more convenient for some traders and means there is no need for storing or securing physical quantities of silver.
Traders would open long (buy) positions, if they think the price of silver will rise or short (sell) positions if they thought that the price of silver will fall. The difference in silver price between the entry and exit is the traders realised profit or loss, excluding any broker commission and fees.
The most common silver CFD instrument to trade on is XAGUSD. This is silver priced against US dollars. With a trading broker, users can speculate on the price of silver (XAGUSD), as well as on other related markets such as XAGAUD which is silver priced against the Australian dollar.
The majority of brokers who offer silver CFD trading will provide access to leverage which enables a trader to control a larger position size with a small deposit. For example, an account balance of $1,000 with 1:5 leverage, could theoretically take a position size of $5,000. Whilst this can increase profit potential, it also significantly increases risks and the potential loss from a trade. Therefore, it is imperative traders have a clear understanding of how leverage works and the risks involved.
Where to trade silver?
Many online brokers provide silver trading. You can see a selection of our best brokers below with whom you can open a trading account to trade silver online.
ASIC, BVI, CBI, FFAJ, FSA, FSCA, IIROC
Min $100 Deposit
2006
1:400
FCA, CFTC, NFA, BaFin, FINMA, ASIC, FMA, MAS, FSA, FSCA, DFSA, JFSA, METI, MAFF
Min $250 Deposit
1974
1:200
ASIC, CySEC, IFSC, DFSA
Min $5 Deposit
2009
1:888
ASIC, CySEC, FSA
Min $200 Deposit
2007
1:500
ASIC, FCA, DFSA, SCB, CySEC, BaFin, CMA
Min $200 Deposit
2010
1:30
What moves silver prices?
The price of silver is driven by speculation and supply and demand, like most commodities. The price of silver is notoriously volatile compared to that of gold because of the smaller market, lower market liquidity and demand fluctuations between industrial and store of value uses. Understanding the pricing trends for silver requires a careful study of a number of different factors including:
- Supply & demand: Just like any other financial asset, the price of silver is dependent on supply and demand. Whilst silver is more abundant in supply than gold, it also has more uses in industry and beyond. For example, if there was a strike that interrupts mining at a major producer, silver prices may spike over the short term. Likewise, any announcement of a new use of silver, such as in solar panels, could generate more buying and create upward price movements.
- Demand for other metals: Silver is most often extracted from the ore of other metals. For example, copper ore accounts for 26% of all silver mining. Thus, if there is a spike in demand for copper, it can lead to a silver surplus.
- Industrial output: Silver has a wide range of uses within industry, including in the production of solar panels, batteries, LED lights, RFID chips, nuclear reactors, photographic film, semiconductors, touch screens, water purification, wood preservatives and many other industrial uses. So industrial output levels can have a major effect on silver prices.
- Economic uncertainty: Silver is widely considered to have an inherent value. This basically means that it can hold its value when there are times of financial stress or political crises. An example of this was in 2008-2010, when the price of silver actually rose more than the gold price.
- Gold price: Silver trading tends to follow gold trading to a certain extent. Whilst this is not always the case, there can be occasions when there is an obvious price correlation between the two precious metals.
- Dollar price: Like all of the other precious metals, silver is dollar-denominated. This means that currency movements in the US dollar can have an impact on silver prices. That sometimes makes silver an attractive investment to long term investors when the price of the dollar is low, which can in turn drive up its price.
All of these influences are a form of fundamental analysis which can be used to help try and anticipate future price movements. Some traders would combine fundamental analysis with other market analysis such as technical analysis, price action analysis and sentiment analysis to form a more complete trading strategy. It really depends on your individual goals and preferred trading style.
Why trade silver?
Although perhaps not being considered as rare or as valuable as gold, there are still a few benefits that make trading silver markets an attractive proposition in its own right. This includes:
- Costs: Silver generally has a lower cost of entry when compared to other precious metals. For example, an ounce of silver bullion can typically cost around 40-80 times less than an ounce of gold.
- Volatility: Silver is relatively volatile for a precious metal, meaning it can offer ample buy and sell trading opportunities to active traders.
- Safe haven: Many consider silver to be what is known as a ‘safe haven’ investment in times of economic uncertainty. This may be due to the fact it can be used to conduct energy and also melted down to form currency.
- Long or short: When trading silver CFDs you can speculate on falling or rising silver pieces without actually needing to physically own the silver itself.
- Leverage: Many brokers will offer silver trading with leverage which enables traders to control a larger position size. Although as previously mentioned, this can also significantly increase risks.
How to trade silver online?
If you have taken the time to read through the above, you should hopefully have an understanding of how to trade silver. Here is a summary of the key steps:
1. Decide if silver trading is for you
Trading silver online carries an element of risk and can take more time than other forms of investing. You will need to research the silver market, manage your positions, follow market news and decide how to react to it. It is important to understand the risks and dedication that comes with trading silver online.
2. Educate yourself
Before trading silver, it is imperative to learn as much as possible about investing and trading online. Any mistake could prove to be costly. There is an abundance of free educational materials provided by many online silver brokers that can help you to improve your trading skills and knowledge.
Most silver brokerages will also provide a free demo trading account so that you can practice trading silver online with virtual funds in order to familiarise yourself with the trading platforms and practice your trading strategies until you feel confident enough to open a real trading account.
3. Choose a silver broker
In order to trade silver online, you will need a broker account and trading platform to execute your trade positions through to the market. When choosing a broker, there are a few important things to consider such as regulation, commission fees, platforms, tools, education, funding options and customer support.
If you do not have the time to research brokers, you can see a list of our best brokers that we have already prepared to help traders. If you would like to know more, you can also view our detailed guide on how to choose a trading broker.
4. Research silver
If you have made it this far then you may be ready to start trading silver online! The next step is to research the silver market to help increase your knowledge. The best brokers should have this information conveniently displayed for you within their trading platform.
5. Have a silver trading plan
Some of the most important factors that can help determine silver trading performance can be the trading plan and discipline. It is important to have a solid trading plan personalised to your own needs that includes the money management and trading strategy that you will use. Most experts and professional traders would try to not let negative emotions such as fear, anger and greed affect their trading strategy.
6. Buy and sell silver
Once you feel ready to trade silver online, you can analyse the market to help decide if and when you will place your trades. After placing a trade on silver, you will need to keep track of how it performs and manage it according to your trading plan. Some investors will keep hold of silver trades for the long-term, whereas traders may buy and sell silver on a daily basis.
Is silver trading right for me?
Silver trading is a popular choice for long-term investors and active traders. It can be suitable for scalping, day trading and swing trading. Traders who would usually trade forex, trade stocks, trade indices, trade commodities, trade cryptocurrency, may look to diversify their portfolio.
However, it is important to understand the significant risks involved with trading silver online, especially when using leveraged positions. Most experts would suggest trading on a demo account with virtual funds to begin with.
This can be a useful way to familiarise yourself with how to trade silver and using trading platforms whilst allowing you to practice your trading strategies until you feel confident and produce consistent results. Most silver brokers provide unlimited demo accounts free of charge.