Silver trading guide

Silver trading guide

Silver is a $272.950 billion industry, with high demands and great liquidity. In general, there are two ways you can trade silver. Either purchase physical silver coins and bars and lock them in the vault or trade on different exchanges and speculate on the price movement.

As of June 2022, Silver (Trading code XAG) trades at $21.69 per ounce. The record trading price of silver was $48.70 which was reached towards the end of the 1970s. But this was not a fully legitimate evaluation at the time as prices were hugely manipulated. Silver is considered a solid investment by many traders, as it tends to be safe from economic crises.

"I think anybody who is interested in keeping their money safe from the criminal banking system would want gold, silver, and Bitcoin." - Max Keiser

Things to Know About Silver Trading

  • Silver is a safe-haven asset. This means that silver is safe from inflation
  • The most popular silver trading strategies are Trend Trading and Range Trading
  • Silver's prices greatly depend on supply and demand. If demand rises so do prices and vice versa
  • Demand for other elements such as copper and lead can also influence silver prices

What Is Silver Trading

Silver trading is the process of speculating on the price movements of silver in the market. In the past, the most common way to invest in silver was to buy physical silver in the form of coins and bars. Today there are many different trading platforms that give us opportunities to invest in silver without actually owning the physical asset.

There are many different ways to trade silver, such as trading with spot prices, futures, ETFs, and stocks. We can use these instruments to take advantage of the volatility of the silver market. Whenever our prediction as to where the market will move to is correct, we make profits. But if our prediction is wrong we make losses.

Silver is the second most traded element after gold, as it has many different uses in electronics, jewelry, and other industries. 


Why Trade Silver

Silver has high trading volume and low spreads, which makes it a highly tradable asset. It is easy to trade silver with clear and straightforward charts as it has great liquidity. Silver also has a larger amount of volatility when compared with gold, which makes it a great asset to trade for day traders. As the price of silver moves a lot throughout the day, it makes it a perfect asset to trade for day traders who count on this volatility to make profits.

Another advantage that silver has is its wide range of uses. Silver is used in many different fields. It is an important part of electronics, silverware, jewelry, mirrors, and many other useful things. There are constant developments in the technology field that increases the demand for silver quite often.

Silver is considered a safe haven asset. It has a long history of withstanding many different market crashes, and it tends to keep its value during times of crisis and in some cases even becomes more expensive during such times. It is also not affected by inflation. Silver is an exhaustible resource, which means that there is a limited supply of silver available. This is what protects silver from inflation.

If you have faith in our leaders of commerce, don't buy gold. If you do not have faith in them, maybe you should buy gold or silver.” - Robert Kiyosaki


Silver-Gold Ratio - What Is It

The silver-to-gold ratio is a ratio that shows us how much silver we would need to purchase one ounce of gold. In effect, it is similar to trading currency pairs. If the ratio of silver-gold is 80, it means that we would need 80 ounces of silver to purchase one ounce of gold. 

The silver-gold ratio usually depends on the state of the market. If we have a bear market, this ratio tends to go up. The reason behind it is that gold is a more desirable resource, so more people are putting their money into gold to protect themselves from a bear market. This causes gold prices to grow faster than silver, thus increasing the ratio. But when the market stabilizes and a bull market shows itself, this ratio tends to go down as more people are taking their money out of gold to take advantage of the bull market and make profits in other asset classes.


How to Trade Silver

There are many different ways we can use to trade silver. We can make purchases by spot price, use futures contracts, invest in silver stocks, EFTs, and so on.

Spot prices

Purchasing silver at a spot price means purchasing silver at the current market price. This trading method is used when you want to make instant transactions. For example, if the price of silver is high, and you sell your silver at that price, it means you sold silver for the spot price. The same goes for buying silver. If the price is low, and you purchase silver at that price, it means that you purchased silver for the spot price hoping to sell again once the price goes up.


A futures contract is an agreement where you place an order to buy or sell silver when the price hits your desired amount. Futures contracts have expiration dates, which means that if your desired price was not reached, you can either close the contract or roll over them to the next delivery date.

There are many different exchanges that offer silver futures contracts. One of the most popular is the COMEX exchange.

Stocks and ETFs

Silver stocks and ETFs are great ways to invest in this precious metal. Silver stocks usually are connected to companies that are involved in silver exploration and mining. They can also be companies that produce silver for industrial usage. These companies are usually also involved in mining materials other than silver which is found alongside other metals.

Silver stocks usually follow the same principles as regular silver investments. Whenever the demand for silver rises and prices go up, companies that explore and produce silver generate more money and the prices of their stocks go up as well. 

Something that we should also take into account is that those companies work in the production and mining of things other than silver. So, we should always keep an eye on the prices of those other metals and materials that are used or produced by the company we are invested in, as those industries will have an effect on the company's overall stock price. The success of the company is what determines the price of its stock. This being said, while the silver side of the business might be going well for the company, they may be having trouble in some other areas which will cause the stock price to lose value.

What Influences the Price of Silver

There are many different factors that influence the price of silver. From demand and supply to economic situations, there are many things that we have to consider if we want to predict the price movement of silver correctly. Even demand for other alloys can influence the price of silver.

Gold and silver, like other commodities, have an intrinsic value, which is not arbitrary, but is dependent on their scarcity, the quantity of labour bestowed in procuring them, and the value of the capital employed in the mines which produce them.” - David Ricardo

Demand and supply

Any asset is dependent on supply and demand. Silver, alongside other precious metals, is scarce in quantity and has limited supplies. Luckily the demand for silver is relatively high as it is one of the most conductive metals and is used in many different industries, such as medical equipment, electronics, and other industrial fields.

When the market is hot and there are big developments taking place that require large quantities of silver, demand for physical silver increases as more components and products are produced that require this metal. During these periods, the majority of the silver out there is used up during production, which further decreases supply and makes silver more scarce. When there is an economic downturn and development is halted, the demand for physical silver decreases, but demand for it as an investment increases and causes prices to go up.


Global economy

When the economy is in a slump and there are some political uncertainties floating around, investors tend to invest in assets that are deemed safe. Investing in gold is by far the most popular choice during such economic slumps. But just like gold, silver also holds the status of a safe-haven investment, and it attracts the attention of many investors because it is cheaper than gold. When the economy crashes, governments tend to lower interest rates, to encourage customer spending. This causes inflation expectations to rise. Because of these factors, investors start looking for alternative investment opportunities which have a higher potential for giving them good returns. During these times, paper money always losses value, and investors try to protect their assets by investing in noninflammatory assets.

For example, in 2007, just four months before the great recession, the silver price stood at $11.95 per ounce. By February 2008, it was trading at $19.24 per ounce, due to the influx of investors trying to seek refuge in the stability of this market.

US dollar

Well, it is not surprising that silver is dependent on the USD. If the US dollar weakens it will ultimately cause the price of silver to go up as investors would try to protect their assets from inflation and invest in silver. If the US dollar becomes more stable and strengthens, then purchasing silver with other currencies would become more expensive as silver is usually quoted in USD. This will cause the demand for silver to decrease.

Mining industry

It is very unlikely that silver is mined alone. Silver is rarely found in its elemental form and in most cases it is mixed in with other materials such as arsenic, sulfur, copper, and lead ore among others. Because of this, the rise in demand for metals such as copper would increase its mining production and subsequently increase the supply of silver.

Also, silver-oriented mining has a massive effect on the price of silver. When the production of silver overtakes the demand for it, prices tend to fall. While the production can’t keep up with the demand, silver prices go up. A great example of this took place in 2020 when Covid-19 restrictions caused many silver mines to temporarily shut down, and this, combined with the economic crisis, caused silver prices to go up by 44%.


Best Silver Trading Strategies

There are many different strategies that we can us to trade silver. The strategy that you choose to use will mostly depend on the state of the market. If the market is trending, a Trend Trading strategy is the most useful. If the market is in a rangebound state, a Range Trading strategy is the choice for many.

Trend Trading

When a market is in a trending state it means that it is hitting new extremes. If the market is in an uptrend, it means that it will be hitting higher highs and higher lows. If a market is in a downtrend, it means hitting lower lows and lower highs. 

Determine the direction of the trend

Determining the trend of the market might seem a simple and straightforward process, but determining the time frame of that trend is something that might cause challenges. While day trading short-term time frame is used more often than long-term ones, it is still more beneficial to use multiple time frame analysis to determine correct entry and exit signals.

Filter signals in the direction of the trend

Once we determine the direction of the trend, the next step is to use technical indicators in order to determine a good entry and exit signal. One of the best technical indicators that we can use is the Relative Strength Index (RSI). With the help of RSI, we can determine when the asset is being oversold or overbought. Whenever the value of the RSI drops below 30, it is generally considered that the asset is being oversold and should bounce back. On the other hand, when the RSI goes above the 70 mark, the asset is considered overbought and there is the possibility of a crash.

Implement some sort of risk management

Whenever you are trading, irrespective of which strategy you use, you should always have some sort of risk management in place. Risk management is put in place to protect you from big losses. The probability of you perfectly predicting how the market will move is pretty much zero. Because of this, we need to have instruments such as stop-losses in place to be sure that our whole investment won’t be lost just because we were not careful enough.

Range-bound trading

Markets are not always in uptrend or downtrend states. Most of the time they move sideways. This is when a range-bound strategy is most useful. 

Determine the range

When prices are not breaking limits and usually reach the same levels again and again over a period of time, it means that we are in a range-bound state. Support and resistance indicator levels are used to determine the range and upper and lower limits within this range. To determine the support zone we can connect the series of lows, while the resistance zone is determined by connecting the series of highs. 

Filter signals

Finding signals while using a range-bound strategy can be easy. Traders can buy silver when the range hits the support zone and then sell them when the price hits the resistance zone. This strategy is really good if we want to approach your investment with a low-risk high-reward outlook.

Implement risk management

Despite range trading being a less risky strategy, traders should still use some sort of risk management instrument. If we don’t pay attention to the market 24/7, there could be a sudden trend shift that we might miss and lose our investment. Stop-losses and take-profits should always be implemented in all our trading activity. For example, if we bought silver when it was at the support level, we should always have a stop-loss set below the support line.

Trading Physical Silver

Silver bullion is what we call owning actual physical silver. When we invest in silver through EFTs or ETNs, there are always counterparty risks associated with it.

When we hold some shares in silver, we don’t actually own the physical silver itself unless we are an authorized participant in an ETF. While if you own silver bullion, that silver is actually yours, and if something were to happen you can be sure that your investment is kept and secured in a vault or a safe. People invest in silver for insurance, as the real thing is always a better insurance policy than owning shares.

The bankruptcy of MG Global in late 2011 is a great example of this. When MG Global went bankrupt, investors who had warehouse receipts for silver bars, suddenly saw their assets frozen and put in a pool together. After this liquidation, the trustee paid investors 72 cents for every dollar they owned. So investors had just 28% losses on their investments.

Another thing to take into consideration is that ETF fees have eroding effects. Funds that are backed by physical assets use those assets to pay some operating expenses, causing share prices to cost less than the spot price.

Trading Silver Using Technical Analysis

We have mentioned a few trading strategies that traders use to maximize their profits and minimize losses when investing in silver. These strategies use chart patterns and technical indicators to determine the movement in prices. Those patterns are not guaranteed to happen, but in general, they tend to help in identifying high-probability investment opportunities.

There are many different indicators that are available for traders to utilize. Using one or two simple indicators is usually enough.

Both novice and experienced traders tend to use the four indicators that are most effective. Those indicators are, moving averages (MA), relative strength index (RSI), stochastic, and the moving average convergence/divergence (MACD).

When trading, it is always good to use the confluence of indicators. This will help traders to better understand the market, as they are not dependent on just one specific indicator.

FAQs About Silver Trading

What is the best time to trade silver?

The best time to trade silver is when there is high liquidity. Usually, the market is liquid when it is volatile, so when you see high price fluctuation it might be the best time to trade silver.

Is silver a safe investment?

Yes. Silver is considered a safe-haven asset. It does not follow economic crashes and tends to rise in value when there is a crisis. 

Is it safe to buy silver online?

It depends on where you are buying it from. If you are buying it from an official merchant then yes it is safe to purchase silver online. But on marketplaces such as eBay, there are many sellers who are selling fake silver.