How to Trade the Silver Price

David While and David Jones comment: "The last few years we have seen an increasing interest in silver trading. A couple of years ago the price of silver touched $50 and then it reversed quite quickly and interest has to some extent died down."

Silver is a soft, shiny and heavy metallic element with a brilliant white luster. A very ductile and malleable metal, its thermal and electrical conductivity is the highest of all known metals. Besides being used as a store of value, other main uses of silver include applications in areas such as electronics, photography and as antiseptics.

You can trade Silver futures at New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM). NYMEX Silver futures prices are quoted in dollars and cents per ounce and are traded in lot sizes of 5000 troy ounces . TOCOM Silver futures are traded in units of 30000 grams (964.53 troy ounces) and contract prices are quoted in yen per gram.

Consumers and producers of silver can manage silver price risk by purchasing and selling silver futures. Silver producers can employ a short hedge to lock in a selling price for the silver they produce while businesses that require silver can utilize a long hedge to secure a purchase price for the commodity they need.

Silver futures are also traded by speculators who assume the price risk that hedgers try to avoid in return for a chance to profit from favorable silver price movement. Speculators buy silver futures when they believe that silver prices will go up. Conversely, they will sell silver futures when they think that silver prices will fall.