Jumping into the world of precious metals trading can be exciting, but it’s important to know what you’re doing if you’re serious about making a profit. We’ve produced this page, as well as a series of other commodity investment articles, to provide a simple introduction to the fundamentals of silver trading.
Ready to start trading silver? Check out the choices below. If you want to learn more first, keep reading.
Compare the best platforms for trading silver
If you’re ready to get started with silver trading, we’ve posted reviews of the best online silver brokers in the table below. Take a look.
Buy silver bars, right now
If you want to trade silver, you can always take the simple route and buy silver bars or coins. Below, you’ll find a list of reputable websites that sell silver bars and coins.
How to trade silver online – an easy six-step guide
Here are six steps to follow if you want to trade silver online.:
- Know your trading strategy. If you’re a beginner, use simpler silver trading strategies. If you’re an expert silver trader, you may be better equipped to use complex, relatively aggressive trading strategies.
- Decide your budget. Your trading strategy should be informed by the size of your budget. Figure out your budget before you make your first trade.
- Choose your silver type. You can trade silver bars or silver coins. Silver bars come in either the one-ounce size, or larger denominations. Silver coins come in many different designs, from many different countries. Silver bars cost less per ounce, because you’re not paying a premium for the intricate designs found on silver coins.
- Select your broker and sign up. Pick a broker with a good reputation, a well-designed silver trading platform and affordable trading fees. Once you’ve found a broker that fits the bill, you’re ready to sign up.
- Assess and manage your risk. A stop-loss order is a trading strategy that lets you limit the size of your loss by setting a sell order that will trigger when your silver trade falls to a certain price. Figure out what price you want your stop-loss order to hit at, then be ready to enter that order as soon as you make your first silver trade.
- Place your first trade. You’ve done your due diligence and figured out your silver trading strategy. It’s time to make your first silver trade.
Types of silver to trade
Here are some of the different methods you can use to trade silver:
Contracts for difference
A contract for difference is a contract between a buyer and a seller. In a CFD, the buyer pays the seller the difference between the current value of silver and silver’s value at contract time.
- Pros of CFD Trading: You can bet on the value of silver either going up or going down. CFD brokers don’t usually charge transaction costs. CFD trading lets you trade with leverage, enabling you to make larger trades with a smaller amount of capital.
- Cons of CFD Trading: Leveraged trading can expose you to greater risk. If the price of the asset or position drops below a certain point and you don’t have enough money in your account to support the position, you could end up with nothing. If you leave a CFD position open overnight, you’ll be charged a fee. Large price spreads can sometimes cost you more than trading fees.
Silver certificates are certificates of ownership for physical silver. Allocated certificates mean you own specific bars of silver while unallocated certificates aren’t linked to specific silver bars, but rather the dollar value of the silver you own.
- Pros of silver certificates: With a silver certificate you don’t have to worry about storing and insuring your physical silver bars. Transaction fees for silver certificates are often relatively low.
- Cons of silver certificates: In the U.S., silver certificates are considered akin to owning collectibles by the IRS, so you’ll have to pay a 28% capital gains tax on your net gain if you sell. Certificates often require larger minimum amounts than straight purchases of bullion. If you buy a silver certificate and the silver certificate issuer goes bankrupt, you may not recover all of your investment.
A silver futures contract is an agreement to buy or sell silver at a set price, at a set time in the future.
- Pros of silver futures: Futures contracts let you hedge against price fluctuation. The pricing model for futures contracts is relatively simple.
- Cons of silver futures: Unexpected events can cause big price fluctuations that could hurt your trade. Futures contracts have an expiration date, so the contracted price for a silver contract becomes less attractive as the closing date gets closer.
Silver options let you buy or sell silver bullion at a set price on a future date. Silver options aren’t the same as silver futures, however: with silver options, there’s no ironclad contract involved, and you have the option not to buy or sell if you wish.
- Pros of silver options: Trading with leverage means you might realise bigger gains using smaller amounts of capital. You can either go long or short on your options trades, meaning you’re betting on the price of silver to either go up or down.
- Cons of silver options: Because options drop in value as the expiration date gets closer you need to be right within a certain amount of time. Transaction fees tend to be higher than when you trade other forms of silver (including physical silver).
An Exchange Traded Fund (ETF) is a type of investment that contains multiple assets and is traded on exchanges like individual stocks.
- Pros of silver ETFs: If the price of silver rises you’ll almost certainly make money, without the hassle of having to store and insure physical silver bullion. Low management fees keep costs down.
- Cons of silver ETFs: If the price of silver shoots up, you’d likely make more money if you own physical silver.
Research what affects the silver price
There are many factors that can affect the price of silver:
- Silver supply and demand. Labour stoppages and mining discoveries are just two of the factors that can affect the global supply of silver. Meanwhile, overall demand for silver can go up when investors feel the need to hedge against economic downturns. The balance of supply and demand is the most common cause of a commodity’s price movements.
- Market sentiment. Investor optimism and pessimism plays a significant role in determining the price of a commodity. It’s best to jump into silver when investor sentiment is positive.
- Market volatility. Periods of volatility can jangle traders’ nerves, even when silver prices are generally trending up. Stick to a sound trading plan and try not to overreact to sudden swings in silver prices.
- Central bank reserves. When central banks stockpile lots of silver you can usually expect silver prices to rise. When they divest themselves of silver, the opposite can often happen.
- Worldwide jewelry and industrial demand. Consumers jonesing for silver jewellery and companies seeking silver for industrial uses can also affect overall demand. Watch to see if demand rises or falls, as this will affect the price of silver.
- Value of the U.S. dollar. The price of silver is inversely pegged to the U.S. dollar. So if the value of the dollar falls, silver prices go up.
How to sell your silver trade
When selling your silver online, here are five basic steps you’ll take:
- Log on to your silver trading platform.
- Open your existing silver trade.
- Check the price of the silver coins, silver bars or silver-trading vehicle you own.
- Check the spread being offered by the broker to make sure you can sell at a good price. Excessively wide spreads can result in leaving too much money on the table.
- Sell your position for either a profit, or a smaller loss than you might end up with if you keep holding in an ugly market.
Silver trading tips for beginners
Here are five tips to follow if you’re a beginner getting ready to trade silver online.
- Establish your trading goals. A short time frame designed for a quick buck vs. a buy-and-hold, long-term strategy will necessitate very different approaches to trading. Know your trading goals, so you can build a sound plan and avoid being swayed by emotions.
- Figure out your risk tolerance. You can be bold, or you can be conservative. What matters is knowing who you are as a trader. Evaluate your risk tolerance, then you can decide whether you want to make riskier trading moves or play it safe.
- Know your budget. If you have a small budget, a trading strategy that lets you buy and hold might be a better bet than a more volatile strategy that’s fraught with risk. If you have a larger budget, you’re in a better position to try different trading methods.
- Assess market conditions. Are silver prices trending up or down? Know the market before you dive in.
- Pick the silver trading method that works best for you. We’ve been through various trading methods, so you should appreciate how different they are from each other. Make sure you fully understand the trading strategy you want to follow before you make your move.
Try some of our investment courses for beginners
Not quite ready to trade? No problem. Check out our easy-to-follow educational guides to build your knowledge.