Your portfolio can shine more if you include a precious metal silver trading in your financial arsenal. In contrast to gold, the silver price is determined by store of value and requirement of silver in the industry. Gold is not used for any industrial purposes. This is why silver is more volatile than gold and hence provides excellent trading opportunity for those who are equipped to handle it.
Where can you trade silver?
Silver trading can be used as a weapon against inflation. Most traders jump into trading commodities purely as a speculation play meaning that they are not interested in taking physical delivery but in taking profits in cash. Lot of exchanges offers trading of silver. Some of the popular exchanges are CME and NYMEX. Commodities trading is facilitated by many brokers. Almost all of the forex broker allow you to trade gold and silver through their forex platform.
Different ways you can trade silver
Futures is the most common instrument of trading silver. Variety of futures contracts is traded through the exchanges. Standard and mini contracts consist of 5000 ounces and 1000 ounces respectively. At a price of $ 30 for an ounce of silver, the standard and mini contract will cost $ 150,000 and $ 30,000 respectively. The smallest possible move for silver trading is $ 0.001 per ounce which translated to $ 5 and $ 1 for standard and mini contract respectively. Traders with large account size can trade silver effectively and profitably.
For micro account traders, even a smallest size move in price will constitute large portion of risk of your account. To stay in the market longer and trade profitably you should risk only 2% of the money on a trade placed on silver.
Trading of silver is also possible through other financial instruments as well such as options. There are some exchange traded funds for silver. You can invest in them. An indirect way to trade in silver is to trade the stocks of silver mining companies. Their price fluctuates according to the silver price.
Silver trades in a cyclic nature. The usability of the silver in industry makes its price move down when the economy is in bad shape and up in good times As the demand goes up or down, the price of silver goes up or down. A study of broader economic picture is useful for silver trading.
Factors affecting the price of silver
Currencies can be a sign of the silver price in the future. Mexico is the second largest producer of silver. A significant amount of the silver in the world is traded in Peso which is Mexican currency. Silver and Mexican Peso are positively correlated and the correlation is very strong. The price of Peso will fall or rise if the price of silver falls or rises. A chance for arbitrage silver trading can be found with the study of these two financial instruments.
A rough idea about the prediction of silver price can be made by following the gold. These two precious metals are also strongly correlated. Silver price falls in response to the fall in the price of gold. Some economists have come up with a theory that the price of gold should be 16 times that of silver as the amount of silver available is 16 times gold giving rise to gold to silver ratio.
Silver trading is a risky and uncertain game. If silver is traded with little information about the basics of commodities, it will be destructive to your wealth. Proactive ignorant trading will erode your account. Trading on a demo account first is a wise move. Posted by Forex Growth Bot .
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