Silver traders engage in commodity trading based on silver, either trafficking directly in this metal or in derivative products. This is different from being a silver dealer, someone who handles silver in over the counter transactions with members of the public, jewelers, and others. To work as a silver trader, it may be necessary to have a license to practice commodity trading, which requires passing an examination. Traders may also need the sponsorship of a parent organization, depending on whether they want to participate in open outcry at a commodity exchange or wish to trade online or through computer systems.
As with other commodity traders, research is a big part of the job. Silver traders need to keep up with current prices and trends so they understand market movements. They use analysis to predict price movements so they can prepare appropriately, and follow politics closely because it can have an impact on prices for raw silver. Some subscribe to trade publications or clipping services to assist with research, and may use assistants to help them keep pace.
These traders execute trades in very large volume. They may trade silver itself or certificates that stand in for the metal. Using certificates has a number of advantages, as the silver can be safely stored in an appropriate facility while changes of ownership are recorded on the certificates. Derivative products including futures contracts and options are also available for silver traders to use. These can be used to lock in or bet on prices for traders who use advanced analysis.
Investing in commodities like silver can be stressful. The market may move abruptly as public demand rises and falls. Metals like gold and silver are sometimes extremely volatile in response to political and social events, which can make trading more challenging. Skilled traders can profit from rises and falls in price with the assistance of derivatives, but also need to be on top of their analysis to make sure they understand current and projected market movements. A failure to anticipate events may leave a trader in an awkward position.
Open outcry trading on the floor of an exchange is in decline in many regions of the world in favor of electronic trading. In both cases, silver traders usually start out under the sponsorship of a broker or parent organization to develop skills and gain familiarity with other people active in the field. Working independently can expose silver traders to more risk because they don’t have the backing of an investment firm.