Look for the Silver Lining: Learning the Benefits of Trading Silver

SILVER (XAG/USD) is often overlooked by both experienced and new traders who find more headlines about GOLD in financial news. Yet, silver trading can be more affordable than trading other precious metals and provide a greater potential profit of other precious metals if they touch their previous all-time highest prices.

Look for the Silver Lining: Learning the Benefits of Trading Silver

Look for the Silver Lining: Learning the Benefits of Trading Silver

Gold attracts many traders interested in precious metals as a safe haven (along with the Japanese Yen and Swiss Franc) during times of economic or political turmoil. Yet, they often can overlook the fantastic opportunity to make substantial profits trading silver, gold’s more affordable cousin.

Trading Silver

Evidence of silver mining goes as far back 3,000 B.C.E. and has been cited as one of the first five metals used by humans along with gold, copper, iron and lead.

Silver’s use in modern manufacturing is linked to it having the highest electrical and thermal conductivity of all metals and its use in jewelry and coins is due to its rarity and being soft, ductile, malleable and quite lustrous. Silver also has the highest reflectivity of metals and is why it has been so widely used in mirrors and non-digital photography.

Silver’s symbol Ag on the periodic table of elements is derived from its Latin name argentum meaning “shiny white”.   This being said there doesn’t seem to be anytime in the near future when the demand for silver will disappear.

With that being said it’s no surprise that investors and collectors as well as national central banks have historically shown in an interest in trading on silver amassing stockpiles and stashes around the globe.

With CM Trading, both metals Gold (XAU/USD) and Silver (XAG/USD) receive 100 to 1 leverage for the trader. So, for instance a Trader investing $1,000 can trade as if they have $100,000 in the market.

Why? In this market we are not taking possession of the precious metals we are trading. Rather, we are trading on the movement of the price with CFDs (Contracts for Difference). This allows us to make much quicker trades with much lower transaction fees and the potential for much larger profits with a much smaller investment.

Additionally, the trader in this market can make money on the value going up (with a “buy” trade) as well as going down (with a “sell” trade) and you do not have to buy before you sell since we are never taking possession. This is one of the mind bending aspects of online trading that newcomers often struggle to grasp but in a short time can profit from like a veteran trader.

If a Trader had a trade volume size of 1 lot (1,000 ounces) of silver and the silver price went to $50 (its all-time high) that would be a $32 movement on a trade size of 1,000 ounces which would result in potential profits of $32,000 USD. One lot of silver costs at $18 an ounce /divided by 100 to 1 leverage =$180 of used margin to open and sustain the trade.

 Someone buying physical silver would have to have at least $18,000 (plus the cost of transaction fees of upwards of 10 percent) to make the same profits while an online trader could do so on an account of a few hundred dollars though a larger investment of even a few thousand dollars would allow them to trade with better risk management.

 

With Gold say as an example at $1,520 an ounce, if it reaches $1920 an ounce (its all-time high) and a trader has 1 lot (100 ounces), a trader could potentially make $400 x 100 ounces or $40,000 USD or more on that movement. Yet, since Gold costs $1,520 an ounce in this example and you get the same 100 to 1 leverage then $1520 x 100 ounces/divided by 100 to 1 =$1,520 of used margin compared to only $180 of used margin on the same trade size of silver if at $18 an ounce. Many traders would want to have at least $10,000 to trade on 1 lot of gold though smaller trade sizes are possible on both gold and silver on smaller investments. Larger investments give the traders more protection on their trades when the market moves against them until that time their investment matures towards the profit target intended.

Here are some additional silver trading tips:

  1. If you are a Gold trader you probably know for every 1 ounce of gold (0.01 lots) you are trading, every $1 movement will equal $1 profit or risk for your account. So for (0.20 lots ) 20 ounces of Gold, a $10 movement would equal $200 of movement for a trading account.
  2. In trading silver, since there are 1,000 ounces per lot, every 0.01 lots equals 10 ounces of silver so for every .10 cents equal a .10 USD movement or every $1 movement equals a $10 movement per 0.01 lot of silver. So for a 0.20 trade size (200 ounces of silver), a movement of $1 would equal a $200 movement.
  3. The price of Gold dramatically affects the price of Silver and many traders follow the ratio of the two prices for trading insights. Generally speaking, silver will often follow the movement of gold and like gold is affected by central banks lowering or raising interest rates (lower interest rates make gold and silver more attractive and higher interest rates less attractive).
  4.  Announcements and the expected demands of new technological uses of silver will increase the value of silver.
  5. A strong US Dollar (USD) as the leading currency of the world will typically weaken the price of silver and gold and as the USD lowers in value this will tend to strengthen the price of precious metals and other commodities.
  6. As the Indices (risk on assets) are bullish this can weaken risk off assets like safe-havens such as precious metals (gold & silver) and of course the opposite can be true as well.
  7. Interruptions in the supply such as issues with silver mining would typically help raise prices.

Investors at CM Trading, have the opportunity to learn how to trade silver and discuss with a Trading Analyst what silver trading strategy is right for you or develop and implement one of your own.

Register now! if you do not already have a trading account with CM Trading.

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