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. So silver more fluctuating than gold and gives more chances of trading for well informed traders.
Where can you trade silver?
You can use silver trading as a hedge against the 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. Lot of exchanges offers trading of silver. Some of the popular exchanges are CME and NYMEX. Many brokers offer the commodities trading. Through the forex platform of the brokers, precious metals like silver and gold can be traded.
Here is how you can trade Silver
Futures is the most common instrument of trading silver. Variety of futures contracts is traded through 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 smallest possible move for silver trading is $ 0.001 per ounce which translated to $ 5 and $ 1 for standard and mini contract respectively. Traders with large account size can trade silver effectively and profitably. If you have a small account then a tick size of $ 1 will eat out a significant portion of your account as risk. As a conservative trader you should not risk more than 2% of your account on any single silver trade.
Apart from futures, silver can be traded as options. Some Exchange traded funds (ETF) are dedicated to silver. You can invest in them. An indirect way to trade in silver is to trade the stocks of silver mining companies. These stocks follow the price of silver.
Silver trades in a cyclic nature. The usability of the silver in industry makes its price move down when the economy is in bad shape and up in good times As the demand goes up or down, the price of silver goes up or down. A study of broader economic picture is useful for silver trading.
Aspects that can move the silver prices
Currencies can be a sign of the silver price in the future. 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 Mexican Peso will follow the rise or fall in the silver prices. 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. These two precious metals are also strongly correlated. Silver price falls in response to the fall in the price of gold. Some economist claim that the price of silver should be one sixteenth of the price of gold as the amount of gold found is equal to the one sixteenth of the amount of available silver.
Silver trading is a high risk speculative play. If silver is traded with little information about the basics of commodities, it will be destructive to your wealth. Speculation and gambling is a weapon of mass destruction of wealth. A virtual trading of silver is not a bad idea.
If you still have uncertainties about the success of trading silver, read investing in silver . Check out Tadawul Fx review to get a great place to get started on trading silver.
