How to Trade Silver: Top Silver Trading Strategies

These products may not be suitable for everyone, and it is crucial that you fully comprehend the risks involved. Prior to making any decisions, carefully assess your financial situation and determine whether you can afford the potential risk of losing your money. Silver is an excellent investment vehicle and can assist in helping you diversify your portfolio. Historically, silver is uncorrelated (does not move in tandem) with stocks and bond prices and is viewed as a safe-haven asset. Assets such as silver are also seen as a hedge to future inflation, making the shiny metal an attractive candidate for fixed-income investors. Silver is one of the longest-traded commodities and is still widely bought and sold by traders and investors.

  1. For example, the Russian invasion of Ukraine saw the silver price rise as investors reacted to the uncertainty.
  2. Using the chart above as an example we see that silver is nearing the trendline.
  3. In the early 2000s, the price of a troy ounce of silver began to increase.
  4. Determining the trend of the market might seem a simple and straightforward process, but determining the time frame of that trend is something that might cause challenges.
  5. Silver has many industrial applications and is widely considered a stable store of wealth.

One of the easiest ways to buy silver is to take a few minutes to set up an account with an online broker and trade the metal using contracts for difference (CFDs) or buying silver mining stocks. On the other hand, an owner of a silver mine expects 1,000 ounces of silver to be produced from her mine in six months. She is worried about the price of silver declining (to below $10 an ounce). The silver mine owner can benefit by selling (taking a short position on) the above-mentioned silver futures contract available today at $10.1.

The probability of you perfectly predicting how the market will move is pretty much zero. Because of this, we need to have instruments such as stop-losses in place to be sure that our whole investment won’t be lost just because we were not careful enough. However, silver prices have a complicated relationship with the broader economy. The Intercontinental Exchange (ICE) offers an options contract on silver futures.

An options bet succeeds only if the price of silver futures rises above the strike price by an amount greater than the premium paid for the contract. In its simplest form, it is just two individuals agreeing on a future price of silver and promising to settle the trade on a set expiry date. First notice how silver prices are making a series of higher highs and higher lows.

Gold to Silver Ratio

This being said, while the silver side of the business might be going well for the company, they may be having trouble in some other areas which will cause the stock price to lose value. Silver stocks usually follow the same principles as regular silver investments. Whenever the demand for silver rises and prices go up, companies that explore and produce silver generate more money and the prices of their stocks go up as well. It has a long history of withstanding many different market crashes, and it tends to keep its value during times of crisis and in some cases even becomes more expensive during such times. Silver is an exhaustible resource, which means that there is a limited supply of silver available. If you plan to purchase a lot of physical silver, you should consider holding it in an official silver vault.

The advantage of CFDs is that traders can have exposure to silver prices without having to purchase shares, ETFs, futures, or options. The last few years have seen very high levels of volatility in silver prices, possibly pushing silver beyond the generally perceived limits for safe asset classes. There are many different exchanges that offer silver futures contracts.

Demand for silver derives from industrial entities and from investors as a safe-haven asset. Usually, the market is liquid when it is volatile, so when you see high price fluctuation it might be the best time to trade silver. Traders can buy silver when the range hits the support zone and then sell them when the price hits the resistance zone. This strategy is really good if we want to approach your investment with a low-risk high-reward outlook.

Silver Calculator

The CME does have the right to change the leverage it will offer at any time, and this can result in traders having to stump up more margin or be forced out of positions. You will need at least $9,000 to post the initial margin needed to buy one contract. Given the strong investment demand for silver, its price tends to follow the direction of gold, which is the primary precious metal market. Silver is scalping futures a sustainable trading strategy is viewed as a more affordable alternative to gold for investors with smaller portfolios, as silver trades at much lower prices than the yellow metal. Once a trader is confident in the direction of the trend or range of silver, he/she can then look for signals to enter the market using other technical indicators. Which indicators are used depend on the choice of silver trading strategy.

Silver is a way to bet on growing global industrial demand for metals. But even if industrial demand for silver remains fairly consistent, trading demand can be much more variable. Waiting for a confluence in indicators after already determining the overall trend in the market increases the probability of the trade. It does not ensure the trade will be a success, so it is important that the trader manages his/her risk. A trader can manage his/her risk by using stop-losses and take-profits and by using appropriate leverage. When prices are not breaking limits and usually reach the same levels again and again over a period of time, it means that we are in a range-bound state.

Best Silver Trading Strategies

Historical reasons for holding silver largely relate to the diversification that the metal offers investors and its use as a store of value. New trends are also in play, with silver’s use in industry, specifically the renewable energy sector, generating new interest in the market. The best time to trade could be during periods of high liquidity and volatility, when you can enter and exit positions quickly with typically tight spreads and speculate on bigger price changes.

There are many different methods to determining signals, the key to trend trading is to filter those signals and only take trades in the direction of the trend. There are a number of silver trading strategies, but Trend Trading and Range Trading tend to be the most popular among traders of all levels. Silver is a highly tradeable asset because of its high trading volumes and tight spreads. Silver trades with clear chart patterns due to its high liquidity. Intraday traders enjoy the fact that silver has been more volatile than gold during the past due to it being a smaller market in comparison.

A silver option is a right but not the obligation to purchase or sell a silver futures contract or ETF someday in the future. A call option is the right to buy silver at a specific price on or before a certain date. A put option is the right to sell silver at a specific price on or before a certain date. When you trade options, the buyer pays the seller a premium for the right to either buy or sell silver. If you’re new to commodity trading, the good news is that gaining exposure to silver is exceptionally straightforward. There are various ways to buy silver, ranging from holding the metal in physical form to buying silver futures.