How to Trade Silver (XAG/USD): What Moves It and How It Differs

How do you trade silver (XAG/USD)?

Most retail traders trade silver as XAG/USD, the price of one troy ounce of silver in US dollars, through a CFD on the same platform they use for forex. You buy if you expect the price to rise and sell if you expect a fall. Silver moves faster than gold or currencies, so small positions and wider stops are essential.

A troy ounce is the standard weight for precious metals, about 31.1 grams. A CFD, or contract for difference, is a contract with your broker that pays you the change in price; you never own any metal. The live price is on our XAG/USD page.

Silver’s double nature: precious metal and industrial metal

This is the biggest difference from gold. Almost all gold ends up as jewellery, investment bars or central-bank reserves. Silver has two jobs.

• Precious metal: like gold, silver has been a store of value for thousands of years. Investors buy it when they worry about inflation or the financial system. In this role silver follows gold.
• Industrial metal: silver conducts electricity better than any other metal, so it goes into electronics, solar panels and many other products. Roughly half of yearly demand comes from industry. In this role silver follows the economic cycle: busy factories need more of it.

The two jobs can pull apart. In a recession scare, investors buy gold for safety while silver lags, because factories will need less of it. In a strong global upswing, both jobs push the same way and silver can outrun gold.

What moves silver prices?

• The US dollar: silver is priced in dollars, so a stronger dollar usually pushes the price down. The US Dollar Index is the quick check.
• Real interest rates: interest rates minus inflation. Silver pays no interest, so when the real return on US government bonds rises, the price tends to fall.
• Gold’s direction: on most days silver moves the same way as gold, only further. Look at XAU/USD before any silver trade. Our gold trading guide explains the shared drivers.
• Industrial demand: factory surveys from China, the US and Europe, and growth in industries such as solar power, shape the longer trend.
• Risk mood: mild fear can help silver as a safe haven. Severe panic usually hurts it, because industry slows and investors sell whatever they can for cash. In the panic of March 2020, silver fell far more than gold in percentage terms.
• Mine supply: most silver is a by-product of mining lead, zinc, copper and gold, so supply responds slowly to the silver price and rarely drives it day to day.

Silver vs gold: why does silver move more?

The silver market is much smaller than the gold market, and it has no central banks buying steadily in the background. The same wave of buying or selling therefore moves the price further. On a day when gold moves 1%, it is common for silver to move noticeably more, sometimes about twice as much, although the multiple is never fixed. Silver also has a history of violent endings: in 1980 and again in 2011, long rallies ended in falls of around 30% or more within weeks.

What is the gold-silver ratio?

The gold-silver ratio tells you how many ounces of silver it takes to buy one ounce of gold. To calculate it, divide the gold price by the silver price. With hypothetical prices of $2,400 for gold and $30 for silver, the ratio is 2,400 ÷ 30 = 80.

• A rising ratio: silver is weaker than gold, which often happens when markets fear a slowdown.
• A falling ratio: silver is beating gold, which often happens when industry is strong and investors want risk.
• Extremes: some traders treat a very high ratio as a sign that silver is cheap against gold, and buy one metal while selling the other.

There is no normal level the ratio must return to. Over the past half-century it has ranged from below 20 to above 100, and it has stayed at so-called extremes for years. Use it as context, to see which metal is leading, not as a timing signal.

Silver lot size and the value of a one-cent move

At most brokers, one standard lot of XAG/USD is 5,000 troy ounces.

• 1 lot (5,000 oz): a $0.01 move is $50; a $1.00 move is $5,000.
• 0.10 lots (500 oz): a $0.01 move is $5; a $1.00 move is $500.
• 0.01 lots (50 oz), the usual minimum: a $0.01 move is $0.50; a $1.00 move is $50.

Contract sizes vary, so check your broker’s contract specification before your first trade. Margin, the deposit your broker holds while a trade is open, is heavy too. With silver at a hypothetical $30, one lot controls 5,000 × 30 = $150,000 of metal. Under EU, UK and Australian-style retail rules, leverage on silver is capped at 10:1, so you must put up a tenth of the position: $15,000 per lot, or $150 for 0.01 lots.

How to size a silver trade: a worked example

Size every trade from the distance to your stop-loss, the order that closes a losing trade, never from habit. Suppose you have a $5,000 account and risk 1%, which is $50. Silver is at a hypothetical $30.00 and your stop belongs $0.40 away, at $29.60, beyond a recent low.

• Risk per lot: 0.40 × 5,000 = $2,000.
• Position size: 50 ÷ 2,000 = 0.025 lots, rounded down to 0.02 lots (100 oz).
• Actual risk: 0.40 × 100 = $40.

Compare the trader who types 0.50 lots because that is what they use on EUR/USD. That is 2,500 ounces. The same $0.40 stop now costs 0.40 × 2,500 = $1,000, or 20% of the account on one trade. The position size calculator includes XAG/USD.

Spreads, swap and the best time to trade silver

Silver costs more to trade than a major pair. Take a hypothetical spread (the gap between the buy and sell price) of $0.03 with silver at $30. That is 0.10% of the price. A one-pip spread (0.0001) on EUR/USD at 1.1000 is about 0.009%, so here silver’s spread is roughly ten times larger as a share of the price. Long (buy) positions usually also pay swap, the overnight financing charge, and over several weeks it adds up. Our guide to swap fees shows how to check the rate on your platform.

Silver trades almost 24 hours a day, five days a week, with a short daily break around the New York close. Trading is busiest in the London–New York overlap, roughly 8 a.m. to noon New York time, when US data arrives and spreads are tightest. Asian hours are thinner, with wider spreads and sudden spikes. The market hours tool shows the overlap in your own time zone.

How does silver behave on the chart?

• Sharp spikes: silver often pokes through an obvious high or low, takes out the stops sitting there and snaps back, leaving a long wick on the candle.
• Round numbers: whole dollars and half dollars, such as $30.00 and $30.50, often act as support and resistance, levels where price has stalled or turned before.
• ATR-based stops: the ATR, or average true range, measures the average size of recent candles. A common approach is a stop 1.5 to 2 times the ATR of your timeframe. If the 1-hour ATR(14) reads $0.25, a 1.5× stop is about $0.38. When the ATR doubles, the stop doubles and your size halves. The ATR indicator guide explains the method.

Common mistakes when trading silver

• Sizing silver like a currency pair, without working out the dollar risk first.
• Holding large size through US inflation data, jobs data or Federal Reserve decisions, which can move silver several per cent in minutes.
• Assuming silver is always a safe haven because gold is.
• Setting stops tighter than the current ATR.
• Buying gold, buying silver and selling the dollar together and calling it three positions. It is one bet.

Spreads, swap and contract sizes on silver differ between brokers more than on major pairs, so compare regulated brokers before you trade it.

Knowing what drives silver does not make its swings predictable, and a stop-loss can be filled at a worse price when the market gaps. Forex and CFDs, including silver, carry a high risk of loss, and silver’s volatility makes leverage especially dangerous. Only risk money you can afford to lose.