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HOW TO INVEST IN SILVER: EVERYTHING YOU NEED TO START SILVER TRADING

Silver is a highly prized precious metal that is used for jewellery, tableware,
and ornaments. However, the primary use of silver, one that many people are
unaware of, is in electronic devices. Most modern electronic devices, such as
tablets and smartphones, contain silver. It is also widely used in photovoltaic
(PV) cells which make up solar panels.

Silver has a long history and has been traded across continents, empires, and
kingdoms for centuries. Over the years, approximately 1.4 billion kg of silver
has been mined and is considered to be an undervalued precious metal due to its
rarity.

Historically, silver prices have followed a general upward trend and performed
well against inflation. For these reasons, silver is a popular commodity for
investment and trade. Many investors hold silver in order to provide portfolio
diversification.

Silver is generally considered to be a ‘safe haven’ asset for many investors,
which means that the price of Silver usually increases during a global bear
market. However, all investments and trading carry a certain degree of risk, so
we recommend carrying out your own analysis before getting involved in trading
in silver.

In this article, we’ll help you to get started with silver trading by explaining
what it is, how it works, and some of the strategies and techniques you can
apply.



WHAT IS SILVER TRADING?

Silver trading refers to the buying and selling of silver stock or shares to try
and make a profit from short-term price fluctuations or longer-term trends.
Silver stock can be bought and sold on a trading exchange platform such as
TradeEU.

Long-term traders attempt to make a profit by buying silver when the commodity
price is low and selling when it is high. Short-term traders try to make a
profit over a short period such as a day or a few hours.

Short-term trading involves either:

 * going long – buying stock and selling it later (or placing a spread bet) in
   order to profit from an expected increase in the market price.
 * going short – selling stock and buying it later (or placing a spread bet) in
   order to profit from an expected decrease in the market price.

Trading silver over the short-term requires skill and planning, as silver prices
can be volatile over the short-term, providing the opportunity for high reward,
coupled with a risk of losing. For this reason, good silver traders develop a
risk management plan to decide how much they are willing to lose, compared to
the potential gains. A technical analysis of silver prices can help to draw up a
risk management plan and trading strategy.


SILVER PRICE HISTORY

Silver has always been a valuable commodity. Due to its rarity and attractive
appearance, it has been highly prized which has ensured a good price for the
precious metal.



Chart showing the price of silver over the past 30 years.

The above graph clearly shows an upward trend in the price of silver over the
past three decades. It also demonstrates the tendency for investors to buy
silver as a “safe haven” during times of economic instability, which drives the
price up rapidly, such as the 2008 financial crisis and more recently during the
COVID-19 pandemic in 2020.

The highest price ever recorded for silver (in US dollars) was $48 per troy
ounce in April/May 2011. At the time of writing (December 2022), the current
price per troy ounce of silver is approximately $21.


HOW ARE SILVER PRICES INFLUENCED?

Understanding how silver prices are influenced by economic, national, and global
events is very important in trading silver. Traders who stay informed on world
events and take them into account when setting out their trading strategy
considered to be able to make better decisions based on expected market
movements.


US DOLLAR VALUE

Silver prices tend to move in an inverse direction to the dollar, going by the
historical data. As the US Dollar rises in value, silver becomes more expensive
for buyers who want to buy with a currency other than US dollars.

In contrast, the historical data suggests that a fall in the US dollar value
usually means that silver will be cheaper for buyers abroad. The demand for
silver may also increase as a result of a decline in the US dollar.


GOLD PRICES

Historically, silver prices have matched the direction of gold prices, therefore
any significant movement in gold price is likely (but not guaranteed) to be
similar in the silver markets. Gold is the primary precious metal market as it
is more valuable and rare, making it popular with traders. Silver, on the other
hand, is more available and affordable, which means that silver trades at a
lower average price than gold.


INFLATION AND INTEREST RATES

Interest rates tend to control the rate of inflation. When major central banks,
such as the United States Federal Reserve and the European Central Bank (ECB)
make monetary policy decisions that affect the interest rate, it can affect
stock market prices significantly, including silver.

The historical data suggests that during times of high inflation, the silver
spot price tends to rise and often holds its value as other stock and currencies
decline.


PHYSICAL DEMAND

The amount of physical demand for silver will also affect its price. Silver is
used for various ornamental purposes and in a wide range of industrial
applications.

When the economy is booming, demand for silver jewelry and industrial silver
tends to rise which means that silver has historically shown an upward trend
during boom times, as well as times of economic instability.


INVESTMENT DEMAND

Silver is considered by most investors as a safe haven. This means that during
times of economic uncertainty, investors look to silver as a way to secure their
assets, as the stock price is expected to rise and hold its value.


MINING

The silver market is heavily affected by mining. If mining output decreases (due
to political unrest or disaster in certain countries, for instance), less silver
will be available, which in turn drives up prices. A good example of this was
the closure of silver mines during the COVID-19 pandemic, which may have
contributed to rising prices.


TRADING OR INVESTING IN SILVER

 


ETFS

ETF stands for Exchange Traded Fund. An ETF is a publicly listed fund that is
designed to track the price movement of several assets or stock indices.

Silver ETFs contain investment units that represent physical silver. One gram of
silver is equal to one silver ETF unit and is backed by the value of the
physical silver material.

ETFs can be bought as mining stocks, such as Pan American Silver (PAAS), iShares
Silver Trust, and Global X Miners.

Investing in silver ETFs can provide instant diversification across several
different instruments through the purchase of a single ticker.

It should be noted that buying and selling ETFs requires investors to pay a
commission and a management fee if they are held over the long term. Another
drawback of ETFs is that they can sometimes suffer from illiquidity, which may
impact the ability to buy and sell them.


SILVER FUTURES

Another method to invest in silver is through the use of futures contracts. A
futures contract is an agreement by one party to buy and another to sell at a
fixed date in the future. Futures contracts allow investors to speculate on the
future price of silver.

Futures are bought when a trader expects the value to increase substantially in
the future, as it allows them to buy stock but pay later. Traders need a
brokerage account to trade in silver futures.

Future contracts will expire eventually, which means they are not good for
traders looking to invest over the longer term.


SILVER OPTIONS

An alternative way to buy silver stock is to use silver options. Silver options
are suitable for people who want a contract that guarantees the right to buy or
sell an asset at a certain price on any date during the contract.

In other words, options are more flexible than futures which can only be traded
on a specific date. The lack of obligation to buy or sell on a specific date
makes silver options more attractive to traders who want to keep their options
open.

Silver options are categorized into “calls” and “puts.”

 * call option enables the trader to buy silver stock at a set price before the
   contract expires
 * put option enables the trader to sell silver at a specific price at any date
   before the end of the contract.

 


SILVER CFDS

CFDs, or Contract For Difference, is another form of silver trading. The point
is to purchase silver CFDs, which allow a trader to speculate on the price
movement of the precious metal without actually owning any.

A trader can profit from rising and falling prices by going long or short. A
trader taking a long position means they’re speculating that the price will go
up. Taking a short position means they’re expecting the price to fall.

CFDs allow traders to take a position for a long time, ranging from days to
months. However, it is important to know that traders trading silver CFDs will
incur swap fees, which are overnight charges for holding an open position.


SILVER BULLION

Some investors prefer the good old-fashioned method of owning physical assets in
the form of silver bullion. Investors often buy silver bullion as a hedge
against inflation and stock market fluctuations.

Although silver is seen as a safe haven, there is still a risk involved that
investors may lose out if the price of silver drops considerably, as it has done
in the past for short periods.

Physical silver bullion is usually bought and sold in a traditional way, through
local dealers or online dealers. Most silver dealers give you the option of
buying silver coins or silver bars.


TRADING STRATEGIES

Developing a well-thought-out and calculated silver trading strategy and
applying proven techniques are important before you start buying and selling
silver. Trading silver is different from trading stocks or currency pairs. The
following strategies and techniques can be applied, depending on your goals and
acceptable level of risk.


DAY TRADING

Silver is a highly liquid asset over the short-term, with (usually small) price
fluctuations happening frequently throughout the day. Day traders hold a
position for a single trading session and hope to make a profit by accurately
predicting the price movement over a short period of time.

Day trading is significantly more risky than longer-term trading strategies. For
this reason, day traders tend to be more experienced and apply a variety of
techniques to try and gain a trading edge, such as using news trading techniques
to focus on buying and selling.


NEWS TRADING

News trading basically means making trading decisions based on the content of
news reports, updates, and publications. For example, the annual central bank
interest rate releases, policy statements, and other large announcements that
may affect the market price of silver. News trading is particularly could be
useful for day traders as it can help them to decide whether to buy or sell
silver stock over a short trading period.


TREND TRADING

Trend trading involves the use of historical data and charts to look for
patterns in the silver market. Investors can carry out a technical analysis of
the silver market to identify certain trends and make informed and calculated
decisions based on the trends.

If the price of silver is experiencing upward momentum, traders will be inclined
to buy stock and sell at a higher price in the future. Traders can use technical
indicators and tools to help determine when an upward trend changes or a
reversal is about to take place.


POSITION TRADING

Position trading involves keeping a trading position open over the long-term if
the trader believes that the price will continue to rise.


PRICE ACTION TRADING

Price action training involves traders studying recent and current price
movements to decide when to enter or exit a position. The price study usually
only goes back over a few months as older data is considered to be irrelevant
for the basis of price action trading decisions.

In other words, price action trading relies more on technical analysis of recent
data rather than technical indicators which rely on historical data.


SILVER TRADING HOURS

An important part of any trading strategy is to identify the “best” hours for
trading.

The best trading hours for silver depend on whether you’re trading in futures or
spot prices.

The largest derivatives marketplace for electronic trading, CME Globex, is open
for spot trading 23 hours per day from 6pm ET on Sunday to 5pm ET Friday, with a
daily trading break between 5pm and 6pm ET every day.

Most day traders prefer to trade silver when there are periods of high liquidity
and more volatility. This occurs when there is a high market trading volume,
which the data suggests is between 9.30am and 4pm ET on weekdays.

TradeEU allows you to trade spot CFDs and monitor silver prices. Sign up for an
account to access a wide range of resources and tools that might help you build
a silver trading strategy and probably assist to improve the way you trade.


FREQUENTLY ASKED QUESTIONS

Is silver good to trade?

Going by historical data alone, silver has been shown to rise in value and
follow an upward trend overall. However, at certain periods in time the price
becomes more volatile, which means that there are some events which may result
in an unexpected increase or fall in price. Therefore, there is always an
inherent risk involved when trading silver, another precious metal, or any type
of stock.

How do you trade silver?

The most common ways to trade silver are through the use of silver EFTs, CFDs,
and silver futures or options. Some investors may invest in silver bullion to
protect against aggressive market changes. To trade CFDs in silver for instance,
you need to open an account with a reputable CFD broker, such as TradeEU.

Why do people trade silver?

Silver has a good reputation as a “safe haven” asset for traders and provides
portfolio diversification. Silver also provides high earning potential for day
traders as they can potentially profit from small price fluctuations and
volatility.

How do I start trading silver?

If you prefer to not actually own physical silver bullion or buy silver stocks,
you can start trading silver CFDs on TradeEU.

What is the best time to trade silver?

It is advised to trade silver during the US and UK commodity market sessions, as
they account for most of the silver trading in the world.

What is a silver future?

A silver future is an agreement by one party to buy and another to sell silver
at a fixed date in the future. Futures contracts allow investors to speculate on
the future price of silver.

References:

Silver Trading | How to Trade Silver CFDs | Capital.com
How to Trade Silver Online | A Guide to Trading Silver in 2022
(admiralmarkets.com)

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verify your account by sending us proof of identity and residence. This is a
common requirement imposed by regulators and by the CySEC policy. Our support
team will be happy to walk you through it step by step should you need
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GLOSSARY

GOLD STANDARD

A monetary system in which the standard economic unit of account is based on a
fixed quantity of gold. This system was abandoned after the Great Depression of
the 1930s.

Read more
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RISK WARNING:

CFDs are complex instruments and come with a high risk of losing money rapidly
due to leverage. 82.15% of retail investor accounts lose money when trading CFDs
with this provider. You should consider whether you understand how CFDs work and
whether you can afford to take the high risk of losing your money. You should
make sure that based on your country of residence you are permitted to trade
products of Tradeeu.com. Please make sure you are familiar with the Company’s
risk disclosure.

The information on this website is not targeted at residents of the United
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use by, any person in any country or jurisdiction where such distribution or use
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Any information/article/material/content provided by TradeEU or is shown on its
website is intended to be used solely for educational purposes and does not
constitute investment advice and/or consultation on how the client should trade.
Although TradeEU has taken care to ensure that the content of such information
is accurate, it cannot be held responsible for any
omission/mistake/miscalculation and it cannot warrant the accuracy of any
material and information contained herein. Any reliance you place on such
material is therefore strictly at your own risk. Please note that the
responsibility for using and/or relying on such material lies with the client
and TradeEU accepts no responsibility for any loss or damage including without
limitation to any loss of profit which may arise directly or indirectly from the
use of or reliance on such information.

TradeEU is the trading name of Titanedge Securities Ltd with Registration Number
HE411909 regulated and authorized by the Cyprus Securities and Exchange
Commission under license number 405/21.
Risk Warning: CFDs are complex instruments and come with a high risk of losing
money rapidly due to leverage. 82.15% of retail investor accounts lose money
when trading CFDs with this provider. You should consider whether you understand
how CFDs work and whether you can afford to take the high risk of losing your
money.