www.nyse.com ). The contracts trade electronically on the LIFFE CONNECT platform.

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Mini Gold and Silver Trading Benefits for Traders

One of the attractions of futures trading is the high leverage. The National Futures Association defines Leverage as: The ability to control large dollar amounts of a commodity with a comparatively small amount of capital. But leverage is a double-edged sword which creates risk commensurate to the reward. The reality of leverage sometimes prevents traders with limited risk capital (or a personally risk-adverse trading profile) from building and holding long-term positions. Mini contracts can help such traders build and hold positions.

The table below will help illustrate the benefits that mini-sized futures contracts hold for smaller traders. Lets assume a trader forecasting a $3.00 per ounce change in the price of silver (up or down) might also decide that the position requires risking $1.00 per ounce. As the table illustrates, this particular risk/reward strategy equates to $5,000 risk/$15,000 profit objective with a full-sized silver contract and requires that the trader maintain $8,100 in his (or her) brokerage account to meet the Initial Margin requirement. This trader could still implement an identical strategy based on a forecasted $3.00 per ounce price movement with a $1.00 per ounce protective stop order but instead place the trade in the mini-silver contract. The 3/1 risk/reward ratio can be maintained but now the trader needs just $1,620 of Initial Margin Requirement (or one-fifth the amount of a full-sized contract) to establish and hold the position. The 3/1 risk/reward now equates to $1,000 risk/$3,000 profit objective. The point being made is that the mini-silver allows the trader to trade for the same dollar-per-ounce price movement. The trader gives up a greater contract value profit opportunity in return for a lower contract value risk of loss.

Furthermore the mini-sized trader can build a position with one to five contracts ultimately using the same Initial Margin Requirement it would take to hold (long or short) just one full-sized contract. This serves as another advantage for the position trader with a longer term outlook.

Of course in real trading there is no guarantee that you can limit the actual loss to any specific dollar amount.