Forex Trading

An Introduction To Trading Silver Futures

what is silver trading for

Today there are many different trading platforms that give us opportunities to invest in silver without actually owning the physical asset. As of June 2022, Silver (Trading code XAG) trades at $21.69 per ounce. The record trading price of silver was $48.70 which was reached towards the end of the 1970s. But this was not a fully legitimate evaluation at the time as prices were hugely manipulated.

Periods of economic expansion reduce interest in the metal as a store of value, with investors opting for other assets in a risk-on environment. Today, silver has a hybrid role as a precious metal, used as a store of value and an industrial metal used in a variety of important applications. The silver price is driven by investor sentiment as well as economic data indicating the state of industrial activity. Silver mining began more than 5,000 years ago, with the precious metal initially used as a commodity in the Babylonian empire.

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. It guarantees that she will have the ability to sell her silver at the set price.

Mining production

There are constant developments in the technology field that increases the demand for silver quite often. Ideally, traders should pick an indicator they understand and are comfortable with, and then only trade those signals that generate in the direction of the trend. The per-ounce price of silver reached highs in the early 1980s of more than $20 per troy ounce, before dipping back down in the 1990s. The average closing price for silver in 2020 was $20.69 per ounce.

The manufacturer may not be able to purchase the silver today because he doesn’t have the money, he has problems with secure storage or other reasons. Naturally, he is worried about the possible rise in silver prices in the next six months. He wants to protect against any future price rise and wants to lock the purchase price to around $10. The manufacturer can enter into a silver futures contract to solve some of his problems.

what is silver trading for

In the times of high inflation, traders often consider silver a trustworthy store of value, as fiat currencies lose their purchasing power. Meanwhile, a silver trade definition includes a wide range of financial instruments such as options and futures as well as the physical metal. Once the stop loss is identified, conservative traders will look to take a majority of the trend as a profit target.

Silver is rarely found in its elemental form and in most cases it is mixed in with other materials such as arsenic, sulfur, copper, and lead ore among others. Because of this, the rise in demand for metals such as copper would increase its mining production and subsequently increase the supply of silver. There are many different factors that influence the price of silver.

Factors Affecting Silver Futures Prices

With the CFD account, you do not need to trade a massive amount of silver on any one particular trade. Take advantage of the fact that you can do fractional positions, as you begin to “get your feet wet” in this exciting and lucrative market. PrimeXBT allows traders the flexibility to trade a reasonable size, regardless of their experience level. Inflation is a feature that people pay close attention to, as silver can be a hedge for it.

Study the relative performance of alternative investment streams including gold, the stock market, and oil among others. The holder may accumulate ACE’s (two for E-mini or five for micro) to get a 5,000-ounce COMEX silver warrant. Trading silver, or any other market for that matter, demands that you have a trading plan. If you do not, you could find yourself trading based upon a motion, which almost certainly will lead to huge losses.

  1. The 10% margin offered by means that you need only 10% of the value of the trade you want to open, and the rest is covered by your CFD provider.
  2. When the economy crashes, governments tend to lower interest rates, to encourage customer spending.
  3. Because of these factors, investors start looking for alternative investment opportunities which have a higher potential for giving them good returns.
  4. By February 2008, it was trading at $19.24 per ounce, due to the influx of investors trying to seek refuge in the stability of this market.
  5. The COMEX Exchange offers a standard silver futures contract for trading in three variants classified by the number of troy ounces of silver (1 troy ounce is 31.1 grams).

CFDs are flexible instruments that allow traders to speculate on various silver price fluctuations, whether it’s an upward or a downward movement. CFDs are considered more suitable for taking a short-term position on the silver price, due to overnight fees. As with the other trading strategies, it is important to have a risk management plan in place.

Market Participants in the Silver Futures Market

NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. When trading, it is always good to use the confluence of indicators. This will help traders to better understand the market, as they are not dependent on just one specific indicator.

Most traders (especially short term traders) usually aren’t concerned about delivery mechanisms. They square off their long/short positions in silver futures in time prior to expiry and benefit by cash settlement. Unfortunately, a lot of retail traders believe that silver is simply the “poor cousin” of gold. While the two can move in the same direction at times, the reasoning for a move in the silver market can greatly differ from the gold market. Comparing gold and silver dates back millennia, as silver has been thought of as gold’s “little cousin.” Gold is rarer than silver, so it does make sense that silver is cheaper. Both metals are considered to be precious metals though, a safe haven asset, and the form of money.

Spot prices

Silver production in the United States peaked in the 1870s with the Comstock Lode in Nevada, and by the end of the 19th century, humans produced more than 120 million troy ounces every year. One of the most iconic ways humans used silver was as a form of currency. Like any other market, there are a lot of opportunities to make a profit trading silver.

On the other hand, you may hit your profit target, which is where you set your limit order. Again, PrimeXBT will receive the order from your platform to get you out of the market at the best market price. This is what we hope to see when we put a trade on, but it is not always going to be this way.