Your portfolio can shine more if you include a precious metal silver trading in your financial arsenal. Silver gets its price from store value as well as its demand in the industry unlike gold which derives its price purely as store of value. Gold is not used for any industrial purposes. This is why silver is more volatile than gold and hence provides excellent trading opportunity for those who are equipped to handle it.

Who facilitates silver trading?

Silver trading can be used as a weapon against inflation. Most traders jump into trading commodities purely as a speculation play meaning that they are not interested in taking physical delivery but in taking profits in cash. Silver can be traded on many exchanges. CME and NYMEX are some common exchanges. Many brokers offer the commodities trading. Almost all of the forex broker allow you to trade gold and silver through their forex platform.

Here is how you can trade Silver

Futures is the most common instrument of trading silver. There are different futures contracts that are traded on the exchanges. A standard contract is composed of 5000 ounces and a mini contract is made up of 1000 ounces. At a price of $ 30 for an ounce of silver, the standard and mini contract will cost $ 150,000 and $ 30,000 respectively. The tick size for the silver trading is $ 0.001 per ounce which comes out to be $ 5 for standard and $ 1 for the mini contract. Traders with large account size can trade silver effectively and profitably. For micro account traders, even a smallest size move in price will constitute large portion of risk of your account. To stay in the market longer and trade profitably you should risk only 2% of the money on a trade placed on silver.

Apart from futures, silver can be traded as options. There are some exchange traded funds for silver. You can invest in them. Through the silver mining company stocks, you can trade silver indirectly. Their price fluctuates according to the silver price.

A cyclic pattern is observed in the price of silver. The usability of the silver in industry makes its price move down when the economy is in bad shape and up in good times Silver price follows the movement of demand up or down A study of broader economic picture is useful for silver trading.

Factors affecting the price of silver

One indicator of the price of silver in future is currencies. Mexico is one of the biggest producers of silver. A significant amount of the silver in the world is traded in Peso which is Mexican currency. There is a strong interconnection between silver and Mexican Peso. The price of Peso will fall or rise if the price of silver falls or rises. This presents a unique opportunity to arbitrage silver trading. A rough idea about the prediction of silver price can be made by following the gold. The prices of two precious metals gold and silver run in the same direction. Silver price falls in response to the fall in the price of gold. Some economists have come up with a theory that the price of gold should be 16 times that of silver as the amount of silver available is 16 times gold giving rise to gold to silver ratio.

Silver trading is a risky and uncertain game. If you play this game without proper knowledge of the rules of the game, it will result in gambling. Proactive ignorant trading will erode your account. Trading on a demo account first is a wise move.

If you have doubts about the profitability of trading silver, read through is silver a good investment . Take a look at Tadawul Fx forex broker to get a good place to start trading silver.

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Filed under: Currency Trading

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