Volatility and Position Sizing for Silver
Measure silver's volatility as ATR in percent, size positions from a fixed euro risk, and cap the size with leverage and gap stress checks.
What you will learn
- How to express silver's volatility as ATR in percent and compare it with gold.
- How to size a silver position from a fixed euro risk with an ATR-based stop.
- How to add a leverage check and a gap stress test that can cap the size further.
- Why the same euro risk leads to a much smaller silver position than a gold position.
Explanation
The Technical Analysis course explains how the ATR (average true range, the average size of recent price bars including gaps) is calculated, and the Gold course shows the basic sizing formula position size = euro risk ÷ stop distance per unit in euros. Here we apply both to silver, where the numbers behave very differently.
ATR in percent
An ATR of $1.20 means little on its own. Divide it by the price: ATR % = ATR ÷ price × 100. A silver ATR of $1.20 at $40 is 3.0%; a gold ATR of $45 at $3,000 is 1.5%. The volatility ratio silver ÷ gold is then 3.0 ÷ 1.5 = 2. Measure both metals on the same timeframe; the ratio changes over time.
From ATR to size
With a stop placed at a multiple of ATR (for example 1.5 × ATR), a larger ATR % means a wider stop in percent of price. For the same euro risk, the notional value (quantity × price) you can hold is roughly inversely proportional to the stop in percent. If silver's ATR % is twice gold's, the silver position will have about half the notional value of the gold position.
Leverage check
Under the ESMA (European Securities and Markets Authority) rules for retail CFDs, commodities other than gold are limited to 10:1 leverage, so silver CFDs need at least 10% margin, compared with 5% (20:1) for gold. Check your broker's current terms. Margin is a deposit, not your risk; but if a silver position needs a large share of your account as margin, a margin close-out can end the trade before your stop.
Gap stress test
A stop limits the planned loss, not the possible loss. Silver has a history of extreme days: on 30 January 2026, US silver futures fell about 31% in one session, which The Wall Street Journal reported as the largest one-day percentage drop since March 1980. Add a second rule: the loss in a chosen gap scenario (for example a 10% or 15% jump against you) must stay below a maximum share of the account. The final size is the smaller of the risk-based size and the stress-based size.
Contract size
Futures come in fixed sizes (contract specifications were covered in an earlier lesson in this course). A standard COMEX silver contract of 5,000 oz changes by $5,000 for each $1 move; even the 1,000 oz micro contract changes by $1,000 per $1. For small accounts, these sizes often make a 1% risk rule impossible.
For investors: inverse-volatility weights
Long-term holders can use the same idea. If gold's volatility is 15% a year and silver's 30% (hypothetical), weights proportional to 1 ÷ volatility give gold 2/3 and silver 1/3 of a precious-metals sleeve, so each contributes similar price swings. This ignores correlation and is a starting point, not a rule.
Worked example
Hypothetical example: account €20,000, risk 1% per trade = €200. EUR/USD 1.25. CFDs: gold in steps of 0.1 oz, silver in steps of 1 oz. Spreads, financing and taxes are excluded.
| Step | Gold | Silver |
|---|---|---|
| Price, ATR | $3,000, $45 | $40, $1.20 |
| ATR % | 1.5% | 3.0% |
| Stop = 1.5 × ATR | $67.50 = €54.00/oz | $1.80 = €1.44/oz |
| Size = €200 ÷ stop | 3.70 → 3.7 oz | 138.9 → 138 oz |
| Planned loss | €199.80 | €198.72 |
| Notional | $11,100 = €8,880 | $5,520 = €4,416 |
| Minimum margin | 5% = €444 | 10% = €441.60 |
- Same euro risk, but the silver notional is about half the gold notional.
- Gap stress, silver 10% against you: 138 × $4 = $552 = €441.60, 2.2% of the account. A 30% day: 138 × $12 = $1,656 = €1,324.80, 6.6%.
- Futures check: one micro contract with a $1.80 stop risks 1,000 × $1.80 = $1,800 = €1,440, 7.2% of the account: far above the 1% rule.
Common mistake
Practice activity
Hypothetical: account €15,000, risk 1% (€150). Silver $32, daily ATR $0.80, stop 2 × ATR. EUR/USD 1.20. Your stress rule: a 15% gap against you may cost at most 2.5% of the account. CFD steps of 1 oz. (a) Calculate ATR %. (b) Calculate the risk-based size. (c) Calculate the stress-based maximum and the final size.
Show solution
(a) $0.80 ÷ $32 = 2.5%.
(b) Stop $1.60 = €1.33 per oz; €150 ÷ €1.333 = 112.5 → 112 oz.
(c) Gap 15% × $32 = $4.80 = €4.00 per oz; limit 2.5% × €15,000 = €375; €375 ÷ €4.00 = 93.75 → 93 oz. Final size: the smaller value, 93 oz. Planned loss 93 × €1.333 ≈ €124; stress loss 93 × €4 = €372.
Limitations: ATR and gap scenarios are based on the past; a real move can be larger than any scenario you choose.
Key takeaways
- ATR % = ATR ÷ price; compare silver and gold on the same timeframe and update it regularly.
- Same euro risk and a wider stop in percent means a smaller silver notional.
- Final size = the smaller of the risk-based size and the gap-stress size.
- Retail silver CFDs are limited to 10:1 under ESMA rules; full and micro futures are often too large for small accounts.
Next step
In the next lesson you will read silver charts: sessions, gaps, false breakouts and the historical spikes that show silver's tail risk.
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