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InsightsShould I Trade Silver On CFDs in 2022? XAG/USD Investing
Precious metals, including silver, have been continuously attracting investors for centuries from all around the globe who are looking to diversify their investments. Because of the high liquidity tight spreads and high volumes, silver has emerged as a highly tradeable asset. |
Investors enjoy the fact that silver trading has been more volatile than gold trading because it being a smaller market in comparison. This unpredictability of the silver trade allows the investors to take benefit of the market fluctuations.
Investors have a few options when considering silver trading but the most popular one right now is purchasing silver derivatives such as silver CFDs that track the underlying silver price without actually owning any silver.
With CFD silver trading, you can gain significant exposure for your initial capital.
You think silver prices may rise ↗, so you buy silver (XAG/USD). If the market price meets your expectation, you may profit from the price rising. This process is called ‘going long’.
You think silver prices may fall ↘, so you sell silver (XAG/USD). If the market price meets your expectation, you may profit from the price falling. This process is called ‘going short’.
This post is all about silver trading and investing. We will be focusing on the underlying principles of trading silver and answer questions regarding the uncertainty people have with its investment and will also tell you how you can trade silver using CFD.
So, let’s get started.
Should I Trade Silver? Is It Still Worth?
Investors and traders buy silver for 3 primary reasons – as a safety net in contradiction of financial meltdown, as an investment, and as a hedge against inflation.
Previously, investors focused on gold trading. But with gold's rising price, it has convinced investors to spread their risk over other commodities in terms of precious metals.
While the silver market is highly volatile compared to gold, silver offers a likewise remarkable hedge against market fluctuations and inflation as gold. What’s lucrative is the fact that silver does it so at a lower price.
On the other hand, the primary reason for silver’s popularity is constituted by industries. More than 50% of the demand arises from the industry. With that said, silver can always be sold to industries even if the investment market takes the blow.
So, to the question ‘is silver a good investment,’ it can be concluded that silver is a good market that offers reasonable liquidity and fair price discovery. All of this makes silver a good investment asset for many.
However, you need to understand that silver is a highly volatile market and investing in it could fail if the following events materialize:
● A substitution from silver into other metals by industries like jewelry and electronics
● A slowdown in India and China
● A strong US dollar
So, you have to be mindful of these facts when trading silver.
One of the best ways to trade silver is through CFD. It allows investors to speculate on the price of silver.
With silver trading on CFDs, you don't have to buy silver physically and pay extra for its storage. The value of CFD is the difference between its current price and the price of silver at the time of purchase. One of the main benefits of silver CFD is that it gives investors the opportunity to trade in both directions to make a profit. That is, whether you have a negative or positive view on silver's price predictions, you can always try to profit from the future price movement.
Real-time silver price (Source: MiTrade)▼
Silver Trading Online With Mitrade
Understanding Silver Trading On CFD ( With Silver Trade Example)
CFD stands for Contract for Difference. It is a contract that allows two parties to enter into a trade agreement to invest in financial instruments based on the price differences between closing prices and entry prices. That is the buyer will pay to the seller the difference between the asset’s current price and the value of the asset at the time of purchase. In case, if this difference is negative, that is; if the closing price is higher than the opening price, then the seller will pay the buyer the difference.
CFDs are traded between CFD providers and individuals. CFD providers are also regulators of the trading platform. Therefore, you are not advised to use large amounts of capital.
Unlike bonds, stocks, and other financial instruments where you must physically own the securities, CFDs don’t hold any tangible asset. Rather, you will trade on margin with units of a given asset’s price based on its market value. In simple terms, you can speculate on price fluctuations of an asset without having to actually purchase the asset.
So basically CFD is a contract that is designed to benefit from the difference in the price of the asset between the closing and opening of the contract.
Salient Features of CFD:
● CFDs are traded between CFD providers and individual traders
● Particularly anything, any instrument can be potentially traded through CFD
● It is easy to create new instruments for CFD trading
● Minimum contract sizes are extremely small to the extent that you can even buy one CFD share
● You cannot trade CFD in the United States
● They are one-to-one contracts
● They are traded over-the-counter
● They have no expiration date
Read more:
>>How To Trade Gold CFDs in 2022? Gold Trading With CFD
>>How to Day Trade Crypto Like a Pro?
CFDs on silver trading example
When you trade silver CFD, you purchase a specific number of silver contracts on the market. Then you speculate the contracts to make profits. If you expect the price to fall, you sell the contracts and if you expect the price to rise, you buy more contracts.
Below is an example of trading silver on Mitrade:
Step1: Create an account online ( choose demo account or live account, apply online)
Step2：Search the markets you want to trade, such as silver, gold or bitcoin.
Step3：Open a long or short position ( seize the opportunity on markets rise or drop)
* When you select your position size, your margin will automatically populate at the bottom of the deal ticket.
Step4：Set up your position size, take profit, stop-loss, etc.
Step5：Confirm the trade
Buy Silver Bullion vs. Trade Silver on CFDs, Which is better?
Should you buy silver in physical form? Or trade silver CFD is perfect?
Investing in Silver Bullion
This way means you hHold ing silver in the physical form which is great is the best way to diversify maximize the benefits silver investment can offer your investment portfolio
One of the biggest benefits of owning silver in the physical form is that unlike real estate, bonds, or stocks, you directly own a portable permanent store of value and not just a paper claim on silver
Silver Bullion |
Pros: ✔️ There are numerous benefits of investing in silver bullion, some of which you can’t get with almost any kind of investment. ✔️ Silver bullion is a tangible asset. Thus, it cannot be destroyed by water, fire, or even time. They don’t need maintenance as well ✔️ Silver bullion offers a store of value. That means you can actually earn a profit on them when you become risk-averse ✔️ They can’t be hacked no matter what. The online world can easily crumble. But with silver bullion, one cannot erase them or hack into them
✔️ Holding silver in physical form gives you privacy and confidentiality. |
Cons: ❌ Buying precious metals always entail a commission that is generally higher than you would pay to buy bond or stock ❌ Holding silver in physical form means you need plenty of storage space with high security all the time. If you seek professional help, bullion storage entails a storage fee as well
❌ If you hold the silver in the physical form, it might not be immediately liquid ❌ Silver bullion is recognized as ‘collectible’ by the IRS. This means you have to pay capital gain tax if you hold it for over one year. |
Trade Silver on CFD
We have already explained the how mechanism behind silver CFD trading works. It is simple – the agreement takes place between the CFD broker and the individual trader. CFD provides the opportunity to profit by going long or short.
Trade Silver CFD |
Pros: ✔️ Investing Silver With silver trade on CFD, you can trade both short and long positions ✔️ It offers instant order execution, that is; you can instantly open and close positions ✔️ CFDs have much lower fees than the purchase of stocks ✔️ With CFD silver trading, you can trade using leverage. That means you can control a larger position with smaller amounts of capital |
Cons: ❌ You will have to pay high financing fees ❌ You can easily overtrade if you don’t have much experience ❌ You can lose everything you invest because it’s high risks |
So, which one’s better?
Well, both the options are better in terms of investing in silver.
However, if you want to leverage online trading and don’t want to go through the hassle of holding the silver in its physical form, you can always opt to trade with CFD.
5 Steps On How To Trade Silver On CFD?
When you trade silver CFD, you purchase a specific number of silver contracts on the market.
Below, we have explained the steps involved with how you can silver trade silver ( XAG/USD ) through Mitrade platform.
#1 Open an Account on Mitrade
First and foremost, you need to open an account with Mitrade.
Mitrade is a web-based platform that has been designed for your chosen device. With Mitrade, you can access almost 300 markets on all devices.
Once the details have been verified, you are required to fund your account. The platform offers different ways to add funds. You can fund through PayPal, Wiretransfer, or credit card, debit card.
#2 Analyze silver’s price movement and trend
Once you have opened your CFD account on Mitrade, the next step is to analyze the silver price movements and trends. See what other CFD investors are doing and based on that, build a trading plan.
Work with Mitrade's trading tools ( e.g. Trading Analysis/economic calendar) to discover the trading possibility in market fluctuations.
#3 Determine Buy Or Sell your order
Next, you need to understand the principle of how CFD trading works. CFD markets have two prices – the sell price and the buy price.
The sell price is also known as the bid and the buy price is also known as the offer. The difference between the sell price and the buy price is called the ‘spread.’ The price of your CFD completely relies on the price of silver determine buy or sell silver. If you think that the silver price will go up, you buy and if you think that the price will fall, you sell.
#4 Setting stop-losses and take profits
Before placing the trade, you are advised to control work on your by toolsrisk management strategy. Placing stop-losses is an incredible way to automatically close the trade if it reaches a certain level. It is an instruction you set that allows Mitrade to close your open position if it attains a specific level, which is also set by you.
#5 Execute your trade
Finally, you can execute your trade. Now, with each move in the market price, your CFD silver trade will fluctuate. You are required to keep monitoring your trade.
Silver Trading Online With Mitrade
Silver Trading Strategies
Silver trading is easier said than done. It requires you to follow a dedicated set of strategies based on the market to ensure that you always make informed decisions. Below are some of the proven silver trading CFD strategies that you need to follow.
#1 Focus on the silver price
Before you start trading silver, you need to analyze the silver market and determine how it is acting up lately. Determine whether the market is way too volatile right now or is stable so that you can make your next move.
#2 Use a demo account first
We recommend that you use a demo account first before trading in with real money. You can open a demo account with your CFD platform and practice with virtual funds. This way, you can build your confidence as you will be working in a risk-free environment.
#3 Research on what affects the silver price
You need to stay alert all the time to the potential opportunities and key trends so that you can determine the actual factors that affect the price of silver. This way, you can know when to sell and buy.
#4 Limit your leverage
If you are just starting out, you should start by limiting your leverage. The higher the leverage, the higher is the risk as well.
#5 Use stop-loss orders
As discussed in the above section, you need to set stop-loss orders so that you don’t have to risk everything at once. By setting up stop-losses, you give your CFD platform to automatically close the trade if it reaches a certain level.
#6 Don’t put all your eggs in one basket
CFD silver trading is all good but we advise that you distribute your investment wisely. Don’t put everything you have in one basket. You can put some in your CFD silver trading account and some in silver bullion, whatever works.
Conclusion - Should I Trade Silver On CFDs ?
Trade silver on CFDs help you enter the commodity market fast, but it is all about preferences. Some find the CFD option feasible, while others find it to be a lot of risks.
We recommend that you need to research the market first before investing. Explore the waters and assess the risk factors.
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