Trading gold and silver can make you a fortune. The best way to trade gold, silver or other precious metals is to trade futures contract. Now, trading futures can be risky. Futures contracts move fast and show a lot of volatility. Traders profit from this volatility. But, if you are not comfortable with risk then you can keep on trading gold and silver ETFs like the SPDR Gold Shares (GLD) or the iShares Silver Trust (SLV) and other precious metals ETFs. But the point is this that anyone can learn futures trading and profitably trade gold and silver futures contracts.

Let’s illustrate this precious metals trading strategy with an example. A gold futures contract consists of 100 ounces. Now, the margin requirements can vary from one broker to another but it is generally around $5,000. This means you can control 100 ounces of gold with $5,000. Each point the gold futures contract moves up or down, you make $10 or lose $10. Suppose, you bought the gold futures contract and it moved up by 50 points. You make $500 less the commission and other fees).

Let’s get back to our gold trading strategy. Suppose, you buy one gold futures contract that means 100 ounces of gold. It closes up by 30 points in the next few days. You are happy. By the end of the week, it gains another 20 points. You sell your gold futures contract. So, with this one gold futures contract you have made 50 points. That means $500. This is your first trade in a series of four trades.

Now, your second trade starts in a series of four trades. You are happy with your first trade. You have made $500. You enter the market again with two contracts now. You wait for a few days and lo and behold, the market moves 50 points up as you had expected. You sell the two contracts and make a nice $1,000 profit. Your second trade is now complete.

Now, markets don’t move in straight lines. Prices move up, then down and then up. Recently gold prices went as high as $1,400 but then made a sudden retracement of around $70 just a few days later shocking everyone in the market. So, when the prices move down, don’t get shocked. Nothing moves up forever. Whatever moves up will come down also. Now,rumors can make the market jittery. Gold prices rise during times of global political and economic uncertainty. Rumors are flying in the market that gold prices will move up again. You wait for a few days and it does start to rise. You buy three contracts this time and wait for a few days and lo and behold, the market moves by 100 points by the end of the week. You sell the three contracts and make a nice $3,000 profit.

Thus you had completed the third trade in the series of four trades. Now, you are ready for the fourth trade. You watch the market. It is moving up again. You enter with four contracts this time. You wait for a few days and the market is up by 50 points. You sell all the four contracts and make a profit of $2,000. Your total profit in this series of four trades is $6,500. This profit you made in just a matter of few weeks which is not bad. Now, you remove the profit from your account and start all over again with your first trade with one contract in a series of four trades.

You can make these four trades again and again starting from scratch after each four trades. After each four trades, you remove the profit and start again small. This way, you reduce your risk of losing all your profits if the market suddenly moves against you. This is how professional gold traders trade and this is how you should trade. You must have observed that their is nothing much in this gold trading strategy. That’s what it is and that’s how you should keep it!

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Mr. Ahmad Hassam has done Masters from Harvard University. Trade gold with these Forex Signals. Read this Gold Mining Stocks Guide from two pro traders!

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