Dear Futures Trader:

I’ve always said it just takes one or two monster trades each year to make a year. Sometimes, if we are lucky, the monster trades will even work fast. Take our latest closed out recommendation from my Futures Market Forecaster service.

On Thursday the 13th of April I sent out an email alert to buy May silver futures at 1267 [that’s $12.67/ounce] and we were filled for our company account and clients. A futures contract represents 5000 ounces, requires a margin deposit (currently $4,500), with each penny move equivalent to a $50 profit or loss.

My initial recommended stop [risk point] was 1247, this number representing a risk of around $1,000 per contract traded. The market closed that day at 1285. Now I thought this was going to be a good trade, but what actually took place greatly exceeded my expectations. Here is what happened:

The silver market was closed Good Friday, April 14th, but on Monday it opened at 1318 and closed that day at 1336. We raised our stop to 1294, a level representing a profit.

Tuesday the market opened at 1353 and closed at 1375 --- we raised our stop to 1321.

Wednesday the market opened at 1412 and closed at 1452 --- we raised our stop to 1395.

Thursday morning April 20th, I raised the stop to 1404 and the stop was hit early in the day. The market collapsed on Thursday, closing at $12.52 down $2 but because we had the stop in before the collapse we actually received good fills, most at 1404 and some actually a few cents better.

What this means is this trade returned a profit of $6,850 per contract (minus commissions)... $6,850 in a week, and on only one contract!

Pretty amazing, and this is not a hypothetical trade, we actually traded it. Now certainly not every trade is like this one and I have my share of losers as well. However, even with losers, a trader only needs a few trades like this each year to have a profitable year.

Here’s the key--- first of all money management is crucial. You need to lose less on balance for your losing trades than you make on your winning trades. This is why I recommend a stop loss (which we actually place in the market) for every trade I recommend in Futures Market Forecaster.

Next, do not set a predetermined profit point. If I did this we may have been content with, say $1,000 per contract on this silver trade and never been there for the big hit. It is better to just keep moving your stop at predetermined points if the market allows us to. The first step is to move the stop to a break-even level should the market move your way and then to a profit area, and finally keep expanding the profit if the market continues to move and allows you to do this.

Actionable Advice For Maximum Profits

I expect to see some additional liquidation in silver going forward. Markets like this in the past have had a first break in the neighborhood of 20 to 25%, which would project a bottom somewhere in the mid $11 area, possibly lower. As soon as the market appears to find some support however I likely will flash a new buy signal for Futures Market Forecaster subscribers because there is an old trading rule that says “never sell the first break”. Generally in a major bull move the market will have a secondary rally after the first break is over, so stay tuned!

Oil poised to explode, Gold rocketing to a 25 year high, Copper going crazy, Sugar on the move… If there has ever been a more exciting or profitable time to enter the commodities arena, I honestly cannot remember when!

Do you know how it feels to be on the winning side of a big futures trade? Wow, what a rush!

My 27 years in this business have also taught me how to minimize my losses on the trades that don’t go my way. And as anybody who’s ever even dabbled with futures knows, minimizing your losses is every bit as important as riding your big winners.

Yours for the best trading,
George Kleinman
Editor, Futures Market Forecaster

© 2006 George Kleinman
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Risk Disclaimer

Futures and futures options can entail a high degree of risk and are not appropriate for all investors. Commodities Trends is strictly the opinion of its writer. Use it as a valuable tool, not the "Holy Grail." Any actions taken by readers are for their own account and risk. Information is obtained from sources believed reliable, but is in no way guaranteed. The author may have positions in the markets mentioned including at times positions contrary to the advice quoted herein. Opinions, market data and recommendations are subject to change at any time. Past Results Are Not Necessarily Indicative of Future Results.

Hypothetical Performance

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.