Posted by forex at 4:33 AM
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1. Open a brokerage account with a futures brokerage. Each one will have requirements for how much capital you must have in your account.Silver futures are contracts in which you pay for the right to purchase a certain amount of silver at a specified date in the future, for a fixed price. If the price of silver increases before the delivery date, the value of your right to purchase it for a lower price also increases.Because futures contracts can be purchased for far less than the actual price in the contract, the brokerage will probably require you to keep large cash reserves to cover potential losses. This can be catastrophic if you are unlucky.
2. Learn about the silver market. Silver differs from gold in that it has many industrial uses, and it is not seen purely as a store of value. Educate yourself about the particulars of the silver market so you know who the producers, recyclers and customers are.Many websites are dedicated to silver and precious metals. Kitco and Silverseek are very popular.You will also want to learn technical trading analysis techniques, since most traders try to time the markets, rather than guess about the future price based solely on market research.Finally, you'll want to learn different kinds of futures trading strategies, because there are ways to protect yourself from catastrophic losses. Books about futures trading will be the place to go for this information.
3. Place trades. Once you feel you know enough to start risking money, it's time to get into the market. Most traders recommend sticking to your system, and never becoming emotional.Most traders prefer to trade with the trend of the market, watching for signals that the overall trend might shift in the other direction. They look for chart formations such as 'double bottoms' or 'head and shoulders' patterns that often indicate the market is about to swing in the other direction. If the market appears to be headed up, you would go 'long,' meaning you would purchase contracts to buy future silver. If you expect the price to fall, you would go 'short,' which means you would sell contracts to buy future silver.The danger comes when unexpected news hits the market that the charts don't factor in. For example, silver traders recently learned that silver has become a huge ingredient in deodorant, because it kills bacteria. That's going to make the price go up, and news like that can catch 'shorts' unaware.