HUNTING

Tactical Series

An Insider Tactic for Making Money with Precious Metals without Losing Your Shirt

 

"Marc, is it feasible for a super-small entrepreneur to get into this business and make a living?"

"Absolutely," I said with a big smile.

This is a small part of the conversation I had with a fellow entrepreneur recently.

We were talking about the business opportunity that I'm going to show you in a moment. It's so good that it will be probably keep you up tonight.

I'm not kidding.

The first time I was exposed to this business by a seasoned trader and entrepreneur I lay awake for hours thinking about the possibilities.

So let's get to it!

The business I've been alluding to is precious metals trading.

Actually, it's trading precious metals futures contracts.

Before you report me to the authorities or worse, the Commodity Futures Trading Commission (CFTC), please let me be total up front with you about this business and the possible downside. And I'll do it slowly and clearly.

I Am Not Offering Investment Advice.

I'm only providing information in to give you a basic understanding of futures trading.

The information is not intended to provide specific financial or investment advice for you.

On top of that, you should not act or rely on the information in this issue of without seeking the advice of a qualified financial adviser or futures broker who will ensure that your own circumstances have been considered and that action is taken on the latest available information.

Okay, now that I've managed to scare you senseless… let's move on.

There are Risks When Trading Futures Contracts

In deciding whether or not you want to become involved in any type of futures trading you should be aware you could both gain and lose large amounts of money.

In other words, without limitation, you risk losing money because:

(a) You could lose all the margin funds you deposit with the futures broker to establish or maintain a futures position and lose further amounts as described in paragraph (c) below.

(b) If the market moves against your position, you may be required, at short notice, to deposit with the futures broker further monies as margin in order to maintain your position. Those additional funds may be substantial. If you fail to provide those additional funds within the required time your position may be liquidated. You will be liable for any shortfall in your account resulting from that liquidation.

(c) You could lose all monies deposited with the futures broker, and in addition be required to pay the futures broker further funds representing losses and other fees on your open and closed positions.

(d) Under certain conditions, it could become difficult or impossible for you to liquidate or close a position (this can happen when there is significant change in prices over a short period).

(e) The placing of contingent orders (such as a "stop-loss" order) may not always limit your losses to the amounts that you may want. Market conditions may make it impossible to execute such orders.

(f) The high degree of leverage that is obtainable in futures trading with the futures broker because of small margin requirements can work against you as well as for you. The use of leverage can lead to large losses as well as large gains.

(g) Futures and options trading are not appropriate for everyone. There is a substantial risk of loss associated with trading futures and options on futures. Only risk capital should be used.

(h) No representation is being made that futures and options on futures trading is appropriate for everyone or that it should be viewed as an alternative, replacement or supplemental form of income.

You should discuss these matters with a commodity broker prior to commencing any trading.

Reducing Your Risk by Trading Like a Professional

Look, it's real simple. There's a risk in trading precious metals futures.

However, (and that's a big however) there are ways to REDUCE your risk.

One way to reduce your risk is to avoid futures markets altogether and stick with exchange-traded funds (ETFs)!

I'm not kidding or trying to be funny. ETFs are a great way to invest and trade precious metals. But they reduce risk by removing the leveraging and pyramiding aspect.

Here are three viable precious metals ETFs:

• Ø SPDR Gold Shares (symbol GLD)
• Ø iShares Silver Trust (symbol SLV)
• Ø ETFS Physical Platinum Shares (symbol PPLT)

The important thing to remember is the futures trading business can be learned.

This business is not reserved for the "players" on Wall Street or in the futures pits in Chicago.

I started trading precious metal futures part-time from a back bedroom office in 1991. In less than 3 years I was trading full-time.

When it comes to legitimate business opportunities I try to focus on ventures which do not require huge inventories, office buildings, employees, massive start-up capital, or boatloads of red tape. I also lean toward businesses which have "manageable" learning curves.

The greatest downside of this business may be the start-up capital and learning curve.

Most commodity futures brokerages require a minimum deposit of $5,000 to open an account. I would recommend at least that much. But hang on to your cash and let me explain this business to you from an insider's perspective.

There are many aspects of futures trading. My focus this week is on precious metals futures trading. In future issues, I'll cover other markets and opportunities including options.

A simple overview of this market…

A futures contract is an agreement (obligation) to buy or sell a given quantity of a particular asset at a specified future date at a prearranged price.

Futures contracts have standard delivery dates, trading units, terms, and conditions. They can be based on any one of a number of underlying assets. There are futures contracts available in individual shares and stock market indices, bonds, interest rates, coffee, sugar, orange juice, and other agricultural commodities. You can even trade catastrophe futures (they have to do with insurance) at CME!

Futures contracts are usually traded on government-regulated exchanges like the Chicago Board of Trade (the largest futures exchange), ICE, and the New York Mercantile Exchange.

There are also commodity and currency futures exchanges in most industrialized countries.

Futures prices are quoted by every top financial website and business newspaper on the planet.

The total number of contracts traded on the CME in 2009 was valued at more than $645 trillion!

You can "open" a futures position by either buying or selling a contract. You can "close" a futures position by doing the exact opposite either selling or buying the same contract.

If you believe the price of the underlying asset will rise, you would buy a futures position. This is referred to as being "long." When you buy a futures contract and hold it to expiration, you would be required to take delivery of the underlying asset, or equivalent cash value, at a prearranged price and by a certain date.

But don't worry, only a small percentage of futures contracts are held to expiration. Most of the money is made during the life of the contract.

If you believe the price of the underlying asset will fall, you would sell a futures position. This is referred to as being "short."

When you sell a futures contract and it is held to expiration, you would be required to deliver the underlying asset, or equivalent cash value, at a prearranged price and by a certain date.

Beginning traders often have difficulty grasping the concept of selling something they don't own. What you are doing is simply selling something on paper - via the contract.

There is a risk of sustaining substantial losses when trading precious metals futures.

The good news is you can learn to significantly reduce your risk.

One way to reduce risk is to always have a specific strategy for winning trades and losing trades.

In other words, you need to know what you're going to do if the market moves against your positions. The strategy I'll show you today has worked for me, and for hundreds (possibly thousands) of precious metals traders.

Another way to reduce your risk is to buy or sell options. We won't get into all the specifics of option trading in this week's issue but until we do, it wouldn't hurt for you to do some research on the topic on Google.

But know this, when you purchase an option your risk is defined – upfront.

For example, if you buy an option for $500 that is the most you can lose.  Your downside risk is limited to the "premium" or the price you pay for the option.

How Professional Traders Make Money in the Precious Metals Market

There are thousands of systems, techniques, and software programs on the market. Most of them are designed to help you make money in precious metals market. Obviously, some products, programs, and strategies are better than others

But I learned a trading strategy many years ago (from a professional commodity trader) that still works today. You won't need expensive sophisticated software trading programs or hundreds of technical manuals.

The most important aspect of the strategy is the concept of REMOVING PROFITS after you've completed a successful trade. My trading mentor encouraged me to put profits in a separate account. I‘ve continued doing it to this day.

I know the concept of removing profits sounds too easy. But you would be amazed how many traders have a "let it ride" mentality when it comes to futures trading (or any business venture for that matter).

And because we could be talking about substantial profits in some cases, it's important to approach this business like a business... not like a weekend in Las Vegas!

The basic premise of the trading strategy I'm going to show you is to leverage (like an inverted pyramid) your positions through a series of four trades.

Please don't read too much into this strategy either. In other words, you don't have to add, subtract, multiply or divide ANYTHING into this strategy to make it better.

After you've completed the series of four trades – you'll remove your profits (amateurs NEVER do this) and start over again by trading SMALL positions.

The Essence of This Trading Strategy

Here's a hypothetical trade using the strategy so you can see what it looks like in practice:

A gold futures contract (COMEX) consists of 100 ounces of gold.

The deposit or margin to control this contract will vary with each brokerage, but it is currently around $5,000. This means you can control 100 ounces of gold with a current value of about $60,000 for $5,000.

Each time a gold futures contract moves one point, the value of the contract increases or decreases by $10.

If the price of a gold futures contract "closes up 10 points," that would mean the value of the contract increases $100 (10 x $10 = $100). If you bought a gold futures contract when the market opened and you sold that contract after it had gained 50 points, you would have made $500 (less commission and exchange fees).

It's fairly simple.

Let's say you purchase one gold futures contract at the market price and it closes up 20 points. You hold on to the contract and don't sell.

Over the next couple of days, the gold futures contract closes up another 20 points ... and then you decide to sell it. You would have made $400 (40 points x $10 = $400).

This would have completed the first trade in a series of four trades. Now we're ready for the second trade in the series.

This time, you're going to buy two gold futures contracts.

The market starts dropping like a lead balloon, but you don't panic, because you know every market goes up and down all the time. You're confident that the price of gold futures will continue to rise, and it does.

The market closes up 50 points by the end of the week, and you sell your two gold futures contracts. When you sell your two gold futures contracts, you would make $1,000 (50 points x 2 gold futures contracts = 100 points x $10 = $1,000).

Are you with me?

You've just completed your second trade in a series of 4 trades.

Important Point: Unlike real estate, coins, brick-and-mortar businesses, and hundreds of other investments, the futures market is IMMEDIATE. This is especially true for the markets that have large volume and open interest (open contracts). The precious metals futures market is huge. When you place an order to buy or sell, it's filled almost instantly! No lawyers, accountants, appraisers, government workers, or employees are required.

Remember, with the strategy I'm showing you, you'll be leveraging your positions through a series of four trades.

Once the four trades have been completed you'll remove all of your profits. Then you'll start a series of four trades over again – remembering to start out small.

Let's get back to our hypothetical example……

The following week, you buy three gold futures contracts.

But this time, rumors are escalating about the possibility of some sort of crisis in the Middle East or Iran or North Korea, which, of course, affects gold in a big way.

People usually flock to gold in times of uncertainty.

The gold futures price jumps 100 points in two days. By the end of the week, gold futures are up 110 points and you sell all three gold contracts.

How much would you have made so far?

Well, on the first trade you made $400. On the second trade, you made $1,000. And on the third trade you made $3,300 (3 contracts x 110 points each = 330 points x $10 = $3,300).

So in our hypothetical example you would have made $4,700 ($400 + $1,000 + $3,300 = $4,700) through three out of a series of four trades.

The following Monday, the gold futures price drops 50 points. You're in shock.

Welcome to the precious metals futures market! But don't worry. Uncertainly and sudden volatile prices swings happen all the time. You should plan on it.

Whenever I trade I use the "carpet theory." This means the carpet can be pulled out from underneath you at any time, for no reason.

Anyway, on Tuesday, the gold futures market picks up where it left off.

This time, you buy four contracts at the market price. The price continues marching upward, but stays flat the rest of the week. The following Monday, the gold futures market picks up again and by Wednesday, the price is up 50 points.

Now you decide to sell all four of your contracts for a profit of $2,000 (50 points x 4 gold futures contracts = 200 points x $10 = $2,000).

Your total profit through all four levels of trades would be calculated as follows:

Level 1 = $400

Level 2 = $1,000

Level 3 = $3,300

Level 4 = $2,000

Your bottom line profit for the entire series of four trades would be $6,700 in a matter of weeks!

Remember the most important part of this strategy:

Remove your profits! Leave just enough in your account to start over again small.

The three most important things to remember about this strategy are:

• Pyramid your positions through a series of four trades. Obviously, you can repeat the process as many times as the market moves in your favor. But always keep the four levels clearly in your strategy.

 

• Remove your profits from the market once the series of four trades is complete.

 

• Start over again small. (I keep emphasizing starting over small because it's part of the essence of this strategy)

That's how some of the most successful professional commodity and precious metals traders do it.

Following the same strategy, it's surprisingly easy for the "little guy" to make a living in this business and maybe even a fortune.

In fact, I think precious metals futures trading qualify as one of the top laptop-business opportunities of all time! I advise you to learn as much as you can about it.

Once you have a solid footing in the concepts and know what questions to ask, call one of the brokerages listed below and ask for more information.

Insider Tip: As promised in the intro to this issue, you can make money with precious metals futures if the market skyrockets, collapses, or stays flat. If the market is surging higher, you can make money buying futures. If the market is collapsing, you can make money selling futures. And if the market is flat you can sell precious metals call and put options!

We'll get into options trading in future issues.

But know this: Many a fortune has been made by going against the crowd and selling options. Most investors have no idea how to sell commodity options, they typically buy them.

When you feel ready, find a brokerage that meets your requirements and open an account.

Your humble host,

Marc Charles

(Ed Note:  Marc Charles is referred to as "The King of Business Opportunities" ....and for good reason. He should be known as "The King of Legitimate Business Opportunities"...because he's launched, bought, sold reviewed and advised on hundreds of businesses and money making opportunities. He understands legitimate opportunities. Marc has agreed supply League of Power members with crucial updates regarding legitimate business and money making opportunities.)

***** Action Strategy *****

If you're new to precious metals futures trading, start your education today.

Research the topic on Google.

Read books and articles written by hands-on (successful) professional traders.

You can "practice" trading before risking a dime!

That's right…..you can "paper trade" futures before you start trading actual money.

*** HOT TIP ***

Obtain a $20,000 Paper Trading Account Absolutely FREE – here

You can also use financial websites which offer commodity futures quotes, like Commodity Futures Charts and Quotes.

Simply select the commodity you want to trade, obtain the current market price (or quote) and start trading "on paper".

Quotes are typically displayed with an opening price, high, low, and settle, or closing price.

Now, on paper right down the number of contracts you would like and make note of the closing price. You'll pretend to place an order the next day using the closing price as a guideline.

Try paper trading using the approach I outlined in this week's issue. You'll have fun and gain insight into the markets.

Again, the key is to go through a series of four trades only, remove your profits, and then start over again small.

I recommend that you trade only the precious metals futures contracts on the regulated U.S. exchanges.

******** Valuable Resources ***********

Top World Commodity Futures Exchanges

CME

Global FOREX

Kansas City Board of Trade

Liffe NYSE Euronext

London Metal Exchange

Minneapolis Grain Exchange

NASDAQ OMX

Brazil Bovespa

Hong Kong Mercantile Exchange

Shanghai Futures Exchange

China Financial Futures Exchange

Recommended Books

Market Wizards: Interviews with Top Traders, by Jack Schwager

The New Market Wizards, by Jack Schwager

Trade Your Way to Financial Freedom, by Van K. Tharp

Reminiscences of a Stock Operator, by Edwin Lefevre

Winning in the Futures Markets, by George Angell

Elliott Wave Principle by Robert Prechter Jr.

All About Futures, by Russell Wasendorf Sr.

Commodity Brokerages

DT Futures

Lind-Waldock

Ace Commodity

Farr Direct

Zumo

Transworld Futures

R.J. O'Brien

Traders Network

 

 

 

 

 

 

 

 

 

About the Author

Marc Charles is referred to as "The King of Business Opportunities" ....and for good reason. Marc's launched, bought, sold reviewed and advised on hundreds of businesses and money making opportunities. He understands legitimate opportunities. He has written dozens of bestselling ebooks, courses and webinars, as well as hundreds of columns and special reports. Marc provides crucial updates on legitimate business and money making opportunities.

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