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Silver Trading | How to Trade Silver in 2020

In this guide, we will be focusing on how to help you get started trading silver. We included essential information about silver markets, the best CFD brokers that offer silver trading and provide silver trading strategies.
Tom Chen
Author: Tom Chen
Last Updated: May 19, 2020
How to Trade Silver for Beginners 2020
How to Trade Silver for Beginners 2020

In terms of characteristics, silver is a mix of gold and copper. This precious metal has a wide range of industrial uses but also is being used as a safe-haven asset to protect against inflation and economic uncertainty. Among all precious metals, silver is the best thermal and electrical conductor and as a result, silver is a valuable component in electrical applications, mirrors, glass coatings, medicine, photography, nuclear reactors, and many more.

Silver is also a very rare precious metal, though it is not as rare as gold, which is the main reason why it is considered as a ‘safe-haven’ asset. As a matter of fact, the monetary system of Silver Standard in which fiat currencies were backed by a fixed weight of silver was officially in use up until September 1935.

As silver is one of the most significant commodities in the world, the commodity was added to futures exchanges and the first silver trade was on July 5th, 1933. Historically, silver is more volatile and unpredicted than gold and other precious metals, meaning it is a good choice for traders who thrive in a volatile market.

In this guide, we will be focusing on how to help you get started trading silver. We included essential information about silver markets, the best CFD brokers that offer silver trading and provide silver trading strategies.

On this Page:

    How to Trade Silver in 3 Quick Steps:

    Simply follow these three easy steps to start trading silver in the easiest and fastest way:

    Step 1: Open a Trading Account

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    Open a free trading account with our recommended broker. As part of the registration process, you will be required to submit your personal details for KYC.

    Step 2: Deposit Funds

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    Once you have completed the registration and your account has been approved, you can transfer funds to your account by one of the provided payment methods.

    Step 3: Demo and Live Trading

    Fund your account

    Begin trading on a demo account. A demo account allows you to trade in real-time but also learn about the mechanics of silver trading and understand basic terms.

    Step 1: Open a Silver Trading Account

    Trading silver can be made in several ways. The first way includes the physical market where consumers can purchase silver bullions in the form of coins and bars from miners and retailers. The second way is to buy and sell silver through the futures market though it requires a high initial investment and a long verification process. The most recommended way to trade silver is via Contract for Difference (CFDs) which allows traders to speculate on silver price movements without physically owning the commodity. In simple terms, a CFD contract is an agreement between two parties on a derivative market to speculate on the price of a specified asset.

    CFD trading is done on margin via online trading platforms such as eToro and Plus500. These brokers allow you to start with a low initial deposit and to trade on a vast array of products. Here are the best CFD brokers that provide silver CFD trading:

    1. eToro - Best Silver Trading Platform for Beginners

    eToro is among the best online trading platforms for beginners. The broker, which was founded in 2006, has made waves in the industry due to its user-friendly social trading platform and the ability to users copy other top-performing traders. In terms of regulation, eToro holds licenses and is registered in several parts of the world as the broker is regulated by the Cyprus Securities & Exchange Commission (CySEC), the Financial Conduct Authority (FCA) and by the Australian Securities and Investments Commission (ASIC).

    Silver is among the range of products offered by eToro. However, eToro offers a unique way to trade silver with a social online trading platform that includes posts of other members, the ability to copy other traders, and investing in CopyPortfolios.

    Our Rating

    • A user-frinedly intuitive social trading platform
    • Regulated and licensed by top regulators worldwide
    • eToro allows users to copy other traders' actions
    • eToro charges an overnight fee
    • Not available in the United States
    75% of investors lose money when trading CFDs.

    2. Plus500 - Competitive Spreads for Silver Trading

    If you want to execute a large number of silver trades, you might want to try CFD trading on Plus500. The CFD broker provides a silver CFD contract with fixed 2 pips spread, initial margin of 5%, and a leverage ratio of 1:20.

    Plus 500 was founded in 2008 and has gained a positive reputation in the trading community. Plus500UK Ltd authorized & regulated by the FCA, and additionally regulated in several jurisdictions across the world: the Australian Securities and Investments Commission (ASIC) in Australia and the Cyprus Securities and Exchange Commission (CySEC) in Europe.

    Our Rating

    • Regulated by CySEC, FCA, and ASIC
    • Plus500 offers the Negative Balance Protection feature that prevents traders from big losses
    • Plus500 offers a wide selection of stocks
    • Plus500 charges inactivity fee
    • Not available for US residents
    CFDs are complex financial instruments and 80.5% of retail investor accounts lose money when trading CFDs.

    3. Forex.com - Best option for US traders

    FOREX.com is the best option for traders in the United States who want to trade silver. The leading forex broker, which is regulated in seven jurisdictions worldwide, is offering US foreign exchange brokerage, and the option to trade unleveraged gold and silver contracts.

    Founded in 1999, Forex.com is one of the first brokers to offer traders access to CFD trading. The broker is regulated by the following regulators: The Financial Services Authority (FSA) in Japan, the Financial Conduct Authority (FCA) in the UK, the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) in the US, Investment Industry Regulatory Organization of Canada (IIROC) in Canada, and the Australian Services and Investments Commission (ASIC) in Australia.

    Our Rating

    • Offers silver trading for US residents
    • Regulated in seven jurisdictions by top financial regulatory authorities
    • Forex.com offers MT4 and MT5
    • Does not provide leverage for silver trading
    • Offers a narrow selection of markets and products

    Step 2: Learn How the Silver Market Works

    What is Silver?

    Silver is a precious metal commodity that was first discovered in Asia before 4000 BC. Silver has been an essential part of our daily life for centuries and even today, it is one of the most used precious metals in several industries and fields. Unlike most precious metals, silver is similar to gold as it is considered a safe-haven asset and commodity-backed currency.

    The silver standard, which was in use by governments until 1935, was a monetary system in which a national fiat currency was backed by silver to ensure the purchasing power of government-issued currencies. Nowadays, silver is one of the most famous and tradable assets on the planet.

    Unlike gold, silver prices are more prone to industrial developments as the commodity is highly used in medical and industrial applications. Silver is affected by several factors including high demand, supply disruptions, economic uncertainty, geopolitical tensions, economic growth, developments of emerging markets, and market sentiment.

    How the Silver Market Works

    Silver is a global commodity and is traded all over the world. While silver is used as an industrial component, it is also traded as an investment and besides from buying physically silver and hold it, there are other ways to enter the silver market that are more suitable for day trading, enabling traders to leverage their positions and execute a large number of trades. Silver futures are traded on these exchanges:

    Comex Silver, Chicago Mercantile Exchange – This is the main futures market for silver. The exchange offers three silver future contract classification: 5,000, 2,500, and 1,000 troy ounces of silver.

    Tokyo Commodity Exchange (TOCOM) – The TOCOM offers silver futures contracts of 321.51 troy ounces.

    London Metal Exchange (LME) – The LME combines spot and futures deliverable contracts that can be traded electronically from 01.00 to 20.00 (London time).

    Multi-Commodity Exchange (MCX) – The Multi-Commodity Exchange of India offers electronically traded silver futures and options.

    Silver is mostly mined in Latin America and consumed in all parts of the world, hence, day traders must follow any relevant piece of information that can affect silver’s demand and supply. Here are some of the main factors that influence silver prices:

    • Global economic growth/recession
    • Inflation/deflation
    • Geopolitical tensions
    • The Mexican economy
    • Silver seasonality
    • Global and regional industrial production data
    • CFTC Commitment of Traders Report
    • CFTC Silver Speculative Net Positions

    Step 3: Choose a Silver Trading Strategy

    Silver is a volatile tradable asset because of its high trading volumes and liquidity. In the past few years, the commodity has recognisable repetitive chart patterns with a seasonal demand process that influence silver prices. Like any other commodity, a balance of technical and fundamental is key to having a profitable account.

    Technical Analysis

    Many day traders tend to focus on technical analysis. It’s important to note that the silver market (like any other market) cannot be constantly affected by market news and political events and therefore, technical analysis can help you to pick the right trades.

    While every trader has a different approach and set of tools, there are some ‘must-have’ technical indicators to follow. A Fibonacci Retracement is a useful tool for intraday trading, in particular for commodities. Another indicator for silver trading is the Relative Strength Index (RSI) which identifies the overdemand and oversupply of security. Other popular momentum technical analysis indicators include the Moving Average (MA), MACD, and Bollinger Bands.

    Note that the silver market is characterized by quick moves and high volatility, however, you might want to find a trading strategy to trade range-bound market.

    Economic Growth and Uncertainty/Geopolitical tensions

    Silver is considered a safe-haven investment during a period of market instability. Consequently, the precious metal behaves very similarly to gold and rises in when there’s economic uncertainty. On the other hand, silver is acting indifferently at times of economic growth and stability. Here are some of the top economic indicators to follow:

    • Interest rate decisions
    • Consumer Price Index (CPI)
    • GDP – Economic Growth (Mexico, China, United States, etc)
    • Unemployment rate
    • Non-Farm Payrolls

    Silver Follows the Price of Gold

    Generally speaking, silver prices usually follow the price of gold, meaning you can find many trading opportunities by searching for price anomalies and small price gaps.

    Gold-Silver Spread

    The gold-silver ratio is a measurement used to calculate the number of silver ounces in one ounce of gold. As silver is highly correlated with gold, traders use the gold-silver spread in order to predict future price movements of one of the two commodities. Furthermore, the gold-silver spread is one of the most popular and liquid spreads along with Brent/Crude and wheat/corn spreads.

    ^XAU Chart

    Step 4: Open a Silver Trade

    Placing an order to buy or sell silver is simple and can be done in two easy steps. First, log in to eToro’s homepage, complete the registration process and search for Silver at the search box on the top of the trading platform.

    Silver eToro trade

    Now, eToro funnels you to the silver trading page where you can see posts from other members, stats, and trading charts. To place an order, click on the ‘Trade’ button, set the amount of the trade, the desired leverage ratio, and send the order to the market by clicking on the ‘Open Trade’ button.

    eToro 2

    Conclusion

    Silver traders are mostly people who have the ability to predict market trends and hold a position for a long period of time. The silver market is characterized by large moves and high volatility, and therefore, this market is a better match for “big positions traders”. The fact that silver is used far more in the industry than gold makes it easier to analyze. Silver traders often track silver leading exporting countries such as Mexico, China, Peru, and Russia, but also make sure importing countries such as Canada, Japan, and China are doing economically well.

    At the end of the day, silver is a highly speculative asset, in particular for the purpose of day trading, however, you must anything in your power and control to gain the necessary information and data to detect successful trading strategy.

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    Disclaimer eToro: 75% of investors lose money when trading CFDs.

    FAQs

    What is the best time to trade silver?

    Most silver CFD contracts follow CME futures contracts that are traded from 11am to 10pm GMT.

    What is the market symbol for Silver?

    The ticker symbol for the silver spot is XAG. The ticker symbol of silver futures on the Chicago Mercantile Exchange is (SI: CMX).

    What are the main factors that influence silver prices?

    The main factors that influence the price of silver are demand and supply, economic status (growth/recession), geopolitical events, industrial output, the US Dollar, gold prices, and new technologies.

    How much money do I need to trade silver?

    For CFD trading, you will be able to deposit a relatively low initial deposit. For example, eToro requires new traders to deposit $200 in order to start trading with leverage.

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    All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
    Tom Chen

    Tom is an experienced financial analyst and a former derivatives day trader specialising in futures, commodities, forex and cryptocurrency. He has a B.A. in Economics and Management and his work has been published on a range of publications, including Yahoo Finance, FXEmpire and NASDAQ.com.

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