How to determine the right sword?

Solution 1:

For any Human or common animal you should use the Steel Sword and they will have a red Health Bar.

For any Monster type you should use the Silver Sword. These monsters will have a grey/silver Health Bar.

Examples:

Look at the Wraith (a Monster) Grey Health Bar therefore you use Silver Sword

Silver Sword fight

And now look at these bandits getting roasted. Red Health Bar so you use the Steel Sword

Steel Sword Fight