How to Trade Silver on Forex
Silver is a precious metal held viable by a lot of market participants in its correlation with both Gold and the U.S. Dollar. Highly volatile, the international market keeps tabs on the prices of silver. The abbreviation, XAG/USD means that the spot price for silver is quoted in USD.
The Basis of forex silver trading
Silver trading is desirable in the trading industry. This is in light of its many mainstream uses. And while it is more volatile than Forex gold, Forex silver can be considered as a safety net during times of financial turmoil. Many trade and sell silver in light of certain premises:
- Silver can be used to hedge inflation
- Silver placed in an equity-only portfolio will help decrease volatility.
- The demand for Silver is high in the industrial sector.
- It is a Safe Haven commodity.
- Investors profit from Trading silver CFDs
Silver Traders, Who are They?
Simple and obvious enough, both traders and investors buy Silver. From above, we can narrow down the reasons for trading it to three primary reasons:
- To hedge inflation
- Means of investment
- A trading safety net (as it is a safe haven asset)
Factors That Affect Silver’s Price
There are factors that affect Silver’s price:
- Supply and Demand
- Technology
- The Value of USD
Historical Graph of Silver Trading
The past 50 years saw fluctuations in the prices of Silver. Worthy of note here is its peak at the end of 1979 which was called, the Silver Peak.
Apart from the government, analysts concur that the Hunts hold 1/3 of the entire supply of the precious metal. The peak saw the price of silver jump from below $1.5 per ounce to almost $32 per ounce. However it took a dive by the end of 1980.
Correlation between silver, gold and USD
There is a tight relationship between the Forex Gold and Forex Silver and Forex Silver and the USD. Such connections should be explored if one is to understand their value and viability in Forex trading.
Silver and Gold Correlation
It is already apparent that Forex Silver’s fundamentals are wholly different from Forex Gold. However, the two metals still hold a strong correlation these are traded by the same investors. The year 2008 was crucial to both Gold and Silver. Came to be known as the Crisis of 2008, the year saw the superiority of the former over the latter. Silver prices climbed exponentially with volatility.
The Correlation Between Silver and the U.S. Dollar
A good way to illustrate the relationship among Gold, Silver, and USD is to take a look at the Technical Analysis of your chart. If it says that there is a high probability for the price of silver to fall and say you sell 1 lot (5,000 oz) of XAG/USD at $17.38, the position size will be equivalent to $50 profit or loss. This would be for every 1 cent movement in Forex Silver’s price.
If within the day, the precious metal trades at $17.25 and you close your position, you will make profit through the calculation:
Change of price in cents x $50 = 13 x $50 = $650.
Silver Trading Brokers
Trading Silver allows for greater diversity in Forex. The market is replete with brokers who recognize Silver’s potential as an asset: xm.com with a client base of 196 countries, Libertex established in 1997, EXNESS founded in 2008, RoboMarkets established in 2009, Instaforex operating since 2007.
Conclusion
Silver is simply a viable trading asset. Its many industrial uses make it a commodity impervious to value declines in the Forex market. It bears great value apart from its monetary value in that it is able to hedge inflation and is a safe haven asset as it is able to withstand economic turmoil.
