(Kitco News) - Mike Daly is happy making a living as a singles hitter. After all, home-run hitters who continually swing for the fences tend to strike out a lot.

Daly will quickly books profits when he has them, and encourages his clients to do the same, rather than hold onto positions so long they risk letting them turn into losses.

Daly also recommended commodities traders specialize in one or two markets, rather than trying to dabble in all. In his own case, he became enthralled with gold's mystique while still a teen-ager working on the floor of futures exchanges in Chicago.

Daly is a 30-year veteran of the gold- and silver-futures markets, working as an analyst with PFGBEST in Chicago. He provides analysis and writes a blog for clients who make their own trading decisions.

He has noticed that often when new traders gain experience and start enjoying success, they become overconfident. They soon start letting winning trades turn into losses by staying in a position too long, letting a reversal or correction wipe out gains. As a young trader, he sometimes did the same.

"One of my mentors said you're a good trader…but you try to hit home runs all of the time," Daly recalled. "You'll do very well hitting singles every day."

He candidly admitted to still over-swinging at times. But he learned his lesson and now frequently calls clients who are in profitable positions to speak with them about booking profits before the market takes them away. This is especially the case with clients who have less capital.

"The way to stay around in this business is to take the money," Daly said. "You never go broke taking a profit."

While gold prices have risen in recent years, so have the sizes of the daily range. This increased volatility has added to the risk in futures markets, particularly with around-the-clock trading where big moves might occur when a market participant is asleep.

With $20 daily ranges now frequent, Daly often relies upon options strategies where he has an idea of his potential risk as well as profit. He favors in particular bull call spreads in which he buys a call option at a low strike price and sells a call option at a higher strike price in the same expiration month. A call option gives a holder the right, but not the obligation, to "call," or buy, a specific futures contract at an agreed price during the life of the option. For instance, in Comex April gold, Daly has bought $1,380 calls and sold $1,400 calls in a bet that would hit $1,400 an ounce.

He calculated that if wrong, he might lose $400 to $450. He also figured his potential gain is around $2,000 minus the premium from entering the trade, leaving a profit somewhere in the $1,600 neighborhood.

Like many veteran futures traders, Daly uses both fundamentals, which are news or supply/demand developments, and technical-chart analysis. He considers chart levels to be most beneficial when markets are trading in a range, while fundamentals take center stage when major news breaks.

He regularly calculates chart support and resistance, yet at the same time offers caution, quipping that "all of the ships that land on the bottom of the ocean had a chartist." In particular, when major news breaks, such as central-bank interest rate changes or terrorism events, "you can just about throw those (technical) numbers out the window because you get in a panic mode in the market."

In the past few years, he said gold traders tended to focus on more factors than simply a reaction other markets, particularly as more people look toward precious metals as a safe haven and shy away from fiat currencies.

"It used to be very simple. If the dollar is higher, gold is lower," he said. "If crude is higher, gold is higher. But it's not the case anymore and it hasn't been the case for the last couple of years. No matter what anybody tells you, gold has decoupled and become its own beast."

Daly Favors 'Master Of One' Market Rather Than 'Jack Of All Trades'

Daly encouraged beginning traders to focus on one or two markets and learn all they can, trying to be a "master of one" rather than a "jack of all trades."

His own exposure to commodities—and enthusiasm for gold--began when he was a "runner" on commodity floors in Chicago while still in high school. His job was to pick up cards from brokers and run them to key-punch operators who recorded trades. He was "smitten" by the atmosphere.

At the time, much gold and silver were traded in Chicago, before this later shifted to New York. In the afternoons, Daly accompanied guards from Brinks, helping transfer bullion bars from the exchange warehouses to bank vaults as some market participants took delivery.

"My job was basically to open doors when I was off of the trading floor," he said. "But it was so neat to be a part of something like that…Once you're bitten by the gold bug, you're bitten."

At age 21, he joined the brokerage J. Aron, one of the biggest metals traders in the world at the time. He learned about arbitrage between Chicago and New York markets and soon was given autonomy to trade in the gold pit at the Chicago Mercantile Exchange.

Eventually, nearly all gold trade gravitated toward the floor of the Comex division of the New York Mercantile Exchange. In Chicago, Daly began trading S&P futures. But as trading shifted from the floors and onto electronic platforms, he soon found himself back "to my roots," which was the metals.

"The one thing about gold (that) people should understand is everybody in the world knows gold," Daly said. Inhabitants of some of the poorest regions in the world might be indifferent to crude oil if they are too poor to own cars, but they're aware of the significance of gold.

"You can go in the deepest jungles in South America and people know gold is a symbol of wealth and power," Daly said. "It's really unlike anything."

By Allen Sykora of Kitco News; asykora@kitco.com

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PFGBEST's Mike Daly: "You'll do very well hitting singles every day."