Silver Trading: Opportunities, Risks, and Best Practices

If you’re interested in trading precious metals, silver is a great place to start. While it’s more affordable than gold (XAU), the market is also highly liquid, increasing potential trading opportunities.

Silver trading is a viable strategy for diversifying your portfolio and reducing overall risk. Though, of course, all trading comes with risks.

This Plus500 guide will cover what you need to know to start trading silver, beginning with the basics and the biggest influences on the price of this commodity. Then let’s delve into how to trade silver, focusing on CFDs and how to trade silver online, as well as risk mitigation strategies.

Silver Trading Basics

Among the various precious metals traded as commodities, silver is one of the most actively traded, alongside gold. The ticker symbol for silver is XAG, with the X standing for “index” and AG referring to the Latin word for silver, “argentum.”

Silver is a high-demand commodity for traders for several reasons. While less rare than gold, silver is still physically scarce. Also, in addition to people’s belief that it holds intrinsic value, silver’s chemical composition means it has many industrial applications beyond making jewelry and medals. As the most conductive metal on earth, it is also used in semiconductor chips, cabling, medical equipment, and much more.

Furthermore, silver is considered a safe-haven asset that may be used to hedge against inflation and other stock market movements. It tends to retain its value when fiat currencies, such as the US dollar, the euro, or the Japanese yen, fall due to inflation and often holds its perceived value during stock market downturns.

The main factors that affect the price of silver are supply and demand. Since silver is a natural resource, supply can be unpredictable and is often inconsistent with demand, leading to price fluctuations.

Economic growth and demand for technology that requires silver also increase demand. What’s happening in other parts of the market may push up the demand for silver as a safe-haven commodity.

How to Trade Silver

Here we will talk about two ways to trade silver. You could buy and sell actual silver bullion or make trades based on the value of silver through silver CFDs (contract for difference trading).

Bullion Trading

Bullion trading gives you direct ownership of the silver you purchase. While the marketplaces available for physical bullion trading are more limited, there is the advantage that you physically own the asset. It can be purchased in any quantity and be easily transferred.

Aside from the issue of storing silver bullion if you own large quantities, buying bullion means you need to fund the purchase fully. Additionally, the tax implications when you sell bullion, such as value-added tax and capital gains tax, can vary depending on the country and how long you hold it.

Note that tax implications can vary depending on the individual’s tax situation and jurisdiction.

Silver CFDs

A CFD stands for contract for difference and is a common trading method for many commodities. Like CFDs on other assets, such as currencies, CFDs allow you to gain exposure to the price movement of the underlying asset without owning the underlying asset.

If you are going long, you are opening a position for buying CFDs on Silver at today’s price, believing it will have increased in value by the time you close the trade. Therefore, what you hold will be more valuable than what you originally paid so that you can sell it for a profit.

If you go short, you’re opening a position to sell the CFDs on Silver assets with the anticipation that the value will decrease.

Silver is traded in Troy ounces, with one Troy ounce equaling 31.1 grams. Exchanges will exchange silver contracts in packages. On the Chicago Mercantile Exchange (CME), for example, as of January 2024, a full contract is 5,000 Troy ounces, but you might also trade a mini contract of 2,500 ounces or a micro contract of 1,000 ounces.

Most CFD brokers, like Plus500, will also offer you leverage when opening a contract. This means that rather than requiring the capital to cover the contract's full value, you only need to have a percentage of the total capital. This is called a margin.

However, it’s important to note that leverage also involves higher risks and can magnify your losses as well as your gains.

Example Silver CFD Trade

As a basic illustration, say you decide to buy a silver contract in US dollars and could currently buy silver at $23 per ounce. You want to buy because you think silver will increase in value, so you open a Buy position of 5,000 ounces. That means the value of your contract is $115,000. You need a 10% margin, so $11,500.

In this example, when you close the trade, silver has increased in value to $23.05 per ounce. So you now hold a contract worth $115,250 and have made $250 in profit. Conversely, if the price of silver had fallen by the equivalent number of pips, you would have lost $250.

How To Trade Silver Online

A common way to trade silver is with an online broker such as Plus500, a CFD provider. But regardless of which silver trading platform you choose, ensure they’re reputable,, and regulated in your country. You’ll then need to open a trading account if you don’t already have one.

Silver Trading Hours

Markets are open 23 hours a day, five days a week, from 2200 GMT on Sunday to 21 GMT on Friday, with closures each night between 2100–2200 GMT.

For US residents, this means the market opens at 6 pm EST on Sunday and closes at 5 pm EST on Friday, with daily closures between 5–6 pm.

Silver Trading Strategies

Silver is a highly liquid market, meaning you can buy and sell on demand. This minimizes the risk of being unable to trade an unwanted asset, and it means you can take advantage of small shifts in value throughout the day. This liquidity makes silver popular for day trading, also known as carry trading, especially since silver tends to see greater daily movement than gold.

Deciding when to buy and sell relies on analyzing the market. There are various strategies for doing this, all of which will come with a learning curve.

Fundamental Analysis Strategy
A fundamental analysis strategy relies on your understanding of the economic factors that influence the silver market. You’ll want to track supply levels emerging from mines and analyze demand curves based on market forces, such as increased demand for semiconductors.

Technical Analysis Strategy
A technical analysis strategy is a more data-driven approach where you chart trends in silver price changes to predict when they will likely repeat. You’ll also want to track the movement of commodities correlated with silver. Silver correlates highly with gold and the US dollar but has a historically low correlation to assets like stocks and bonds.

Sentiment Analysis Strategy
A sentiment analysis strategy relies on predicting how the market will likely feel about silver based on news reports and what is happening in the rest of the market. For example, fiat downturns often see commodities perceived to have intrinsic value, like silver, increasing.

You must do your own research before any investment or seek professional advice.

Risk Management Techniques

Some consider silver trading a risk management tool. As previously discussed, diversifying your portfolio with metals can potentially hedge against economic downturns. When currencies and stocks decrease in value, precious metals tend to hold their value or even increase because they’re seen as a safe haven compared to more volatile commodities. Past performance is no guarantee of future results.

However, you can also mitigate risks when trading silver using tools such as stop-loss orders. This sets a maximum on the amount of money you can lose on a trade since the trade will automatically close when the value of the commodity drops to a specified level.

For example, if you purchase silver at $23.13, you can have a stop-loss order that triggers if silver drops to $22.97. Therefore, you know the maximum you can potentially lose before entering into a trade.

Silver Trading FAQs

Is silver trading suitable for beginners?

Silver trading may be suitable for anyone who understands the markets, but it should be approached with caution. It is an accessible asset because of its low price compared to gold, but there is a learning curve to understanding the market.

Why buy silver instead of gold?

Many traders prefer to work with silver rather than gold because silver is more closely tied to the economy. This means more movement and more tools needed to predict what silver might do.

While gold is mainly used for jewelry and trading, silver has many industrial applications.

How to Start Trading Silver

If you’re building a trading portfolio, silver could be a worthwhile commodity to include alongside assets such as currencies and stocks. Diversifying your portfolio helps mitigate risks, and silver is a highly accessible market.

While you always need to be careful, the price and high movement of the silver prices also make it a great learning market. But protect yourself by never risking more than you can afford to lose.