Silver has been an extremely profitable investment for the last several years, as investors look to trade silver and diversify their portfolios and protect themselves from failed economic policies around the world. Global unrest in the Middle East and other regions have also contributed to the upside for silver.
Contracts For Difference or CFDs are proving to be a very effective way to trade silver for many discerning investors. They provide more flexibility than traditional methods of trading silver, since you can profit from either long or short positions.
Let’s take a look at some CFD basics and how you can use them to profit from moves in the price of silver by trading silver online using CFDs.
What is a CFD?
A CFD is a contractual arrangement between a buyer and seller in which the seller has agreed to pay this buyer the difference between an asset’s current value and its future value. CFDs are derivative investements – they derive their value from the price movements of an underlying asset without the need for actually owning the asset outright.
Of all financial products, CFDs probably resemble futures and options the most. However, there are some key differences:
1) Since there is no expiration date, the price does not decay with time.
2) The minimum contract size is small, so as little as one share can be bought.
3) New instruments are easily-created and unrestricted by exchange definitions.
4) CFD trading is conducted off-exchange with market makers or CFD brokers.
Before you begin to trade silver online with CFDs, you need to have a good understanding of the silver market. Silver is the most volatile precious metal, so you need to monitor the silver price regularly. Trading silver successfully requires you manage your risk and not commit yourself to more than you can afford to lose.
Many people who trade silver online use tools that help them manage their risk through alerts and other means. Trading silver online can be very profitable if you are able to preserve your capital to take advantage of future big market moves.