So you see a 10 pound Silky Terrier and the last thing you think is "Hey, what a great watchdog!" Silky Terriers are not large, muscular, threatening looking dogs and they don't have deep, powerful barks that will scare away the bad guys; dogs don't need to look like Dobermans, Great Danes, or Saint Bernards to make good watchdogs. Actually, some of those large, imposing breeds make horrible watchdogs! All a dog needs to be a decent watchdog is the tendency to be somewhat wary of strangers and new situations and the inclination to bark when it senses someone or something new on the way.
Some big, lumbering breeds are gentle giants; they hate barking and they love everyone, not to mention they're often oblivious to anything new happening in their surroundings. This description doesn't fit the Silky Terrier. The may be small, but they're extremely alert, surveying and keeping tabs on everything that goes on around them. Thanks to their terrier personality, they tend to be a bit yappy and will vocalize substantially to communicate their curiosity at new developments; their insatiable curiosity is another characteristic that makes them excellent watchdogs, as they never let anything slip by their scrutiny. They are also quite standoffish in nature and are somewhat wary of strangers; this makes a stranger approaching their home or family worthy of being scrutinized and barked at.
Granted, nobody will be afraid of this little ball of fur, but oftentimes you're not looking to scare people with the sight of your dog. You want a watchdog to alert you to the presence of strangers so that you may be prepared if a dangerous situation arises. Small dogs are acceptable as watchdogs also because sometimes the incredibly irritating, incessant and LOUD noise they make when barking and alerting their owners to someone's presence is enough to wake up the entire neighborhood. Owners and people will come to investigate and any chance of stealth on the part of the intruder is gone. Small terriers have a reputation for being independent, stubborn and thinking they are the kings of the universe; moreover, because they often had to battle with vicious rats, they are extremely courageous and fearless. If an intruder tries to threaten them, they will not back down, stop barking and retreat to a corner; they will continue to bark, perhaps even louder, and so are great even in cases of more intrepid intruders.
If you'd like to use your Silky Terrier as an effective watchdog, you should dedicate a great deal of time and effort into properly training him. You should socialize the dog at an early age so that if he sees you are comfortable around a certain person or animal, he should be as well. The dog should also be taught not to bark at EVERY single noise he hears, or life with your Silky Terrier will be miserable; also count on having to deal with the constant complaints of your unhappy neighbors if your dog doesn't know when to stop. Finally, make sure your dog doesn't take wariness of strangers to the next level and become aggressive towards them.