How to Trade Silver

••• Kondor83/iStock/Getty Images

Investing in silver requires more than a basic understanding of the commodity markets. It also takes insight into global economics, currency fluctuations and governments’ fiscal and monetary policies to generate favorable returns. By using a well-rounded approach to trading, investors are more likely to stay ahead of trends and gain the upper hand when buying or selling silver.

Weigh Risks & Expected Return

A number of factors affect demand for silver, including mine production, industrial output and economic trends. Volatility in the global economy and financial markets can create heightened levels of risk because market conditions are less predictable. Investors need to weigh the risks posed by the current market against their expected returns and decide if their appetite for risk is sufficient to trade silver.

Watch Monetary & Fiscal Policy

The monetary and fiscal policies of governments impact the price of precious metals and currency, making it important to follow the actions of central banks and related agencies carefully. For instance, if the U.S. Federal Reserve adjusts interest rates, which is a form of monetary policy, it directly impacts the purchasing power of the U.S. dollar. This affects the value of silver, making government actions a key component of many traders’ strategies. Traders have to watch the policies of governments around the world, given the inter-connectedness of the global economy.

Select a Trading Strategy

There are a number of technical and non-technical strategies for trading silver. Futures Magazine notes that investors often use moving averages, stochastic indicators and the pivot approach to trade silver investments. Technical trading strategies help investors take some of the guesswork out of trending, but it’s up to the individual investor to develop his own strategy based on what his financial objectives are and his own appetite for risk.

Select an Investment Vehicle

Silver can be traded by using options, futures, exchange-traded funds and a variety of other securities. Each presents a different angle and opportunity to invest in silver. Investors can learn more about specific futures contracts via the CME Group or the New York Stock Exchange, among other financial markets and service providers. Traders can also invest in precious metals exchange-traded funds to acquire silver while diversifying their portfolios with other precious metals.


About the Author

Joseph DeBenedetti is a financial writer with corporate accounting and quality assurance experience. He writes extensively online with an emphasis on current trends in finance. As a Quality Assurance Analyst, he honed his technical writing skills creating standard operating instructions for a consumer finance organization.

Photo Credits

  • Kondor83/iStock/Getty Images