Month: October 2013

The above time series of my portfolio performance says it all. This past week of trading was clearly my worst week of trading yet. My complaining over my earlier losses of 4-5% were nothing compared to the whopping -19% I am currently sitting at.

I was relatively inactive in trading this week. My tactic was simples I was to keep my 13 short positions in wheat as I was confident the high price of wheat that was seen last week were not sustainable. Unfortunately I was wrong, wheat prices continued to rise until Wednesday evening. Luckily, they have started to lose some value. Hopefully I can gain back these losses by the end of next week and finish our trading game without having lost almost 20% of my starting cash value!

Reading through the other blogs it is clear technical analysis is the superior tactic when it comes to speculating in the commodity futures market, which I think may actually explain why I would never make a good speculator. I decided to pursue a Master’s in Food and Resource economics because of how tangible the agriculture industry is. Predicting the future price of food based on “double shoulders” and “shooting stars” is not something of interest to me. That being said it is clear that tangible events, such as supply shortages are clearly reflected in the futures market, demonstrating the vital role future markets play in many industries in which futures are traded.

Despite beginning week four up 1.93%, a series of unfortunate events brought me down to -3.50%.

Strategy

With the Republican-Democrat debt ceiling stand-off still unresolved I decided it most responsible to take an overall bearish position in the commodities markets.  In the event of an American debt default the effects would be felt across countries, industries and markets. Even though I believe it is unlikely Republicans will continue the fight to the point of a default, I thought even just the possibility of an American default would be reflected in downward trends in the commodity markets. Unfortunately I was not correct.

Corn

I had originally shorted 10 contracts at $4.39 on Monday morning, but a quick rise had me doubt my decision. I shortly thereafter covered my position, at a price of $4.42. I lost $1,375.00 in less than an hour. Not a very impressive statistic. On Tuesday, the price of corn began to decrease again, so I shorted 5 contracts, a position that I am still holding and has resulted in some marginal returns.

Wheat

I did everything wrong with regards to wheat. My bearish sentiment resulted in me selling my long position and shorting a whopping 16 contracts.  Although I could of made a good profit if I had covered my position Friday morning, my short position costed me $1400, as the price jumped 6.5 points over the week.

Soybeans

Of course the one commodity that followed the trend I predicted is the one whose short position I decided to scrap. I covered my short position in soybeans at the high on Thursday. Seems I can’t get a break. If I had kept my short position I really would have enjoyed the decreasing prices seen below on all 11 of my soybean contracts.

Conclusions

Just as the past few weeks, I need to be more confident in my decisions. In all of the commodities I too often flip flop on my decisions based on quick jumps without looking at the daily trends. Perhaps I should start using some technical analysis to protect myself from the ups and downs experienced during the day.

I was curious as to why wheat jumped 6.5 points over the week. Some online sources revealed some new demand springing up this week. It would be interesting to know if the increase in demand for American wheat has anything to do with the American dollar being the weakest in 8 months. Even though a depreciating currency is generally viewed as a negative economic indicator, a week currency can encourage exports of commodities. Perhaps the depreciating currency can be credited with the increase in demand for wheat.

Just as texting while driving may leave you stranded in a ditch, trading commodity futures while completing a master’s degree may leave you in debt. Being three hours behind the market you are trading on doesn’t make things any easier either. Once again, good thing it isn’t real money.

Week three was not a good week. Not only did I lose my week two earnings, I find overall portfolio value down 4.4%. My current open positions are as follows:

Action	Symbol	Description	QTY	Curr.	Price Paid	Last Price	Margin	Day’s Chg	Profit/Loss Local/FX	%
S	ZW/Z3	WHEAT DEC 13	14	USD	6.769643	6.865000	37800.00	-0.022500	6,675.000000	1.41%
C	ZK/X3	SOYBEANS NOV 13	-1	USD	13.107500	12.960000	4050.00	0.102500	737.500000	1.13%

It was an interesting week of trading for me. Trying to balance my other work loads while keeping on top of the markets proved difficult as my flip-flopping from a long to short position on corn implies. Further, my bullish view on wheat came back to get me. I must start selling my long positions when returns are good and not let greed get in the way. Many of my decisions this week were based from online readings, however, unfortunately, many of them proved wrong, or perhaps I did not spend enough time digesting the info before applying it to the markets. I also ran into much difficulty trying to get some early morning trading in. I am confident if I am able to analyze my resources before markets meet midday in Chicago I will drastically be able to improve my portfolio. I also believe if I begin using stop orders I will be able to mitigate some of the problems I have been facing due to the difference in time zones from Chicago. I look forward to trying them out in Week 4!