Trading silver futures is similar to trading other commodities in the futures market. Essentially, you are betting on the direction of the silver market and trading based on what you expect the price to be in the future, three to six months down the line generally. Most investors will pay a small percentage upfront, wait out the few months, then either reap in huge profits or loose their investment. Both consumers and producers use the trade of silver futures to control their price risk. Producers and consumers can lock in a price this is advantageous for them depending on how the market plays out, a risk with potentially great returns on investment.
Silver futures trading is similar to foreign exchange trading as you will probably be buying a futures contract in American dollars. How much money you make or loose will depend on the strenght of the dollar. If it weaks, silver prices would go up in relation to the dollar. If it strenghtens, the silver will drop in price. Other factors to keep in mind is that every year the sales of precious metals increases around Christmas with high volumes of jewelry sales during the quarter.
Silver futures are traded at the New York Mercantile Exchange and the Tokyo Commodity Exchange. The New York Exchange deals in dollars per ounce, and trades futures in 5000 troy ounce packages. The Tokyo Exchange uses the equivalent of 965 troy ounces and prices are listed in yen per gram. Remember that you will only put 10% on this investment, a small change in the market can either make you extremely rich or you simply loose all your initial capital.
When looking for a brokering firm, you will need a broker who trades commodities, preferably a highly qualified one with low fees. You will have to remember that fees will take a large part of your profits, so unless you are looking to get a lot of advice from your broker, look for one who can just carry out what transactions you want done. Most online brokerages do not deal with silver futures, preferring to stick to stocks and options instead. OptionsXpress is one virtual trading platform where those who wish to try their hand at trading silver futures online in a real market environment without using money to familiarize yourself with the process before starting your trading.
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