Hello.  I wasn’t really aware this was our last week of trading.  It seems like i’m gonna end the game pretty much with the same money as when I started.  I lost a lot of money on my first week of trading, but as coffee prices are going down the normal trend given the current coffee industry situation my loss is becoming smaller.  I did not get back all my money

on coffee but combined with the wins I had from trading other commodities I am now on the positive side of the rankings.

As I talked on my previous blogs, coffee prices are very volatile.  As seen on the following figures this week they fell from 117 to 112 cents/pound.  Which transformed my 7% loss to a 2% loss in coffee.

I have learned a lot from this game.  My main lesson is that markets almost immediately discount or account for most of the factors that are supposed to affect price.  We sometimes think prices are going to move because of a certain situation when prices already moved because of that situation.  Before we even knew about it!  Of course markets always over/under account and it’s precisely there where we can make good profits/losses.  But, well, being able to determine this is every traders dream!

What can we expect for coffee…..

The following article is very interesting if you want to understand a bit about coffee price fluctuations in time.  I recommend to read it.  It summarizes what I think will happen, which is the story of coffee always and kind of goes like this.

1. There is a huge surplus of coffee at the moment so prices will keep on falling for a bit and stay low for some months.
2. Farmers will receive for their coffee less than its cost, so they will not fertilize and take care of the plantations anymore.  Some will abandon them and farm something different.
3. As this happens the surplus will start to shorten and prices will start to rise again during the next harvests and like a pendulum they will sore in a few years as farmers cannot suddenly start planting again because coffee trees take several years to yield.
4. As everybody planted coffee to take advantage of high prices, within a few years we will come back to today’s situation, with record crops like the ones metioned on the article.

http://www.agrimoney.com/news/supersafra-talk-sends-coffee-price-to-4-year-low–6413.html

I hope we can keep on trading even if the official game is over.

Hasta luego!

This week I decided to try a new strategy.  I decided that instead of waking up early to trade I would stay up late.  It worked great!  Right when the markets open there are always interesting movements as new information built up expectations during the closing hours.  Using this strategy I can trade with stop/limit as the market opens and then go to bed.  When I wake up I just readjust and get ready for the market close.

I have diversified my portfolio and its been paying off.  Now my coffee losses are not as bad and I’ve been making some money on fast daily trades.  Going long on wheat gave me good gains this week.  It could have given me more but I decided to sell and make some gains instead of taking the risking the gain.

I’ve been slowly getting into technical analysis.  I have been trying to apply forecasting techniques learned on FRE 585 to aid on my decision making.  This week I started analyzing moving averages.  I pulled out MA for 20, 50 and 100 days for wheat because this commodity has been having constant, well-defined ups and downs that if understood can help us generate some profits

I remember that moving averages a do not have forecasting capabilities but are more than anything follow what happens.  Despite this traders use them a lot to identify the underlying trend and as an aid to decide at what point to enter or exit the market.

Digging into  moving averages I found that comparing MA’s with different periods can give us a lot of information about the momentum of our trend.  They idea is to compare the convergence and divergence of the two moving averages.  This indicator is called MACD and  oscillates above and below the centerline.  Positive values increase as the shorter MA diverges from the longer MA and means upside momentum is increasing.  Negative values increase as the shorter MA diverges below the longer MA and  means downside momentum is increasing.

It interesting to compare this charts to the MA.  It definitely shows the high upward momentum of wheat has as of today!

By the way  momentum measures the rate of change of price and how fast and strong this changes are.  I will start using this indicators for my futures trades.

You can find much more about MACD here.  http://stockcharts.com/help/doku.php?id=chart_school:technical_indicators:moving_average_conve

By the way I’ve been using stockcharts.com a lot and it is awesome.  Recommended!

Cheers!

As we can see on the graph coffee prices have continued to move horizontally.  We are a few days away form a huge Vietnamese harvest and which might probably start pushing prices down again.  Maybe then I can start making some money.  As I still have cash for trading there is no need to sell with a loss.  So i’ll keep on holding.

As on last week wheat prices went up again on Friday giving me a slight gain.  Unfortunately soybeans when down and will probably continue to go down.  Despite the USDA announcement commented last week supplies are believed to be high and everyone is taking about a fall in prices.  I will cover my position first thing on Monday.

This week I want to try something new.  I’ve been following cocoa for the last week and there are some interesting moves in the market.  People are expecting shortages and low quality due to weather in Africa.  Most farmers do not have adequate storage so product is easily damaged.

The trend is prices will continue to go up but I believe there is a point where the market will exaggerate this and some profits can be made by shorting quick, in a matter of a few hours.  I will try to do some technical analysis during the week to make a better based decision.

The 501 video project has taken all my energy this week and has wiped out my motivation to right this blog.  But despite the fact that is almost 10pm on friday and i’m still at room 366, I will try my best to make it interesting.

This week had some interesting things.  Markets are nervous.  Nobody really knows the impact that the US government shut down will have on them.  Probably a higher one the more it lasts.  What we do know is the USDA released its quarterly stock report before closing for business and it has some interesting news which will analyze discuss further in this report.

First I would like to say this week I had a slight improvement.  My portfolio now shows a couple of little gains overshadowed by the huge hit I took on the first week by trading coffee, which by the way didn’t really move this week.  I’ll keep holding my position.

I decided to buy wheat on Monday because it was in a good streak and analyst said prices will keep on rising.  I had a small gain for the first time!   The December contracts finished a little bit under on Friday, but as an analyst I read from said “it has finished higher 8 out of the last 10 trading sessions”.  Supposedly that definitely marks a trend.  I personally believe wheat will keep on rising next week because there are some signs world output this year will be lower.  Wheat experts are blaming it on heavy rains in Russia and Ukraine.  There is also the expectation that China will have a 9-year high import.  Apart form the USDA news. apparently markets are taking this into consideration and that’s why we have been seeing this upward trend.  I will hold my position.  Probably sell mid week and buy again before the weekend.

After I bought wheat, I heard about the USDA quarterly report mentioned previously and thought it would make prices go up.  It stated stockpiles of all major grains were 20% lower this September than last year so I decided to buy soybeans too.  The markets didn’t seem to care too much about this and just like wheat prices, soybean actually fell during the week.  I though it was going to end up bad again, but surprisingly things recovered by the end of the week and I actually ended up with a small gain.  Maybe markets just took a while to realize we are indeed facing smaller crops, or they were just distracted by the US shutdown.  Judging from this video today at the CBOT they ended up caring a lot.

https://www.youtube.com/watch?v=2eiWYNzF6Uc

Have a great weekend.