As it is the first week of playing the trading game, I am still very confused about how to estimate the open market price for the next day when I consider bidding a product. I realized that it actually requires lots of research about the polices, demands, supplies, weather conditions etc. in order to estimate the price closely to the open market price. I really hope that I could squeeze more time to read more news before I do my decision in the future…

About the first simulated bid of commodity futures in my life…

I could still remember how confused I was when the first time I was determining which position I should take on Sep 13…Since I am in the group of Technical Analysis, the only thing I know about the price is to look at the trends of prices of each product. And since I forgot I should read the other group’s reports before doing decision, it is quite a disaster for the prices that I bid for corn and wheat. According to the trends of prices of corn in CBOT, it actually drops or increases sharply on each day of the open market, so I decided to calculate the range of change of decreasing from a resistance point or the range of change of increasing from a support point. Also, I looked at the prices on each day of the open market at 9:30am in Chicago time zone, which is 7:30am in Vancouver. I found out that the price of corn may decrease to around 730 cents on Wednesday morning. I thought that the price of corn will gradually increase later after the open market price according to the trend, so I decided to buy it at 732 cents. And I used the same strategy to sell wheat at 707 cents…

Fortunately, I entered the corn market successfully with a price higher than the open market price, and I was not able to enter the wheat market since I sold it at a price higher than the open market price. However, I was not sure why I had profits in the Net Position. My margin balance on Sep 13 should be:

Losses from taking long position of Corn: (-2)(732-723)*50=-900

Margin Balance on Sep 13, 2011: 25000-900=24100

Sep 14, 2011

The strategy that I used for Tuesday looks stupid since I never consider about any factors other than the price trend…so on the second day of bid, I consider the strategy that Tasha taught me and other information I found on bloomberg.com…I always thought that I should wait for the price to drop to a price closed to the support point to buy in or wait for the price to increase up to a price closed to the resistance point to sell out, and I never thought that I should actually sell out product before it reaches to support level and to buy it back when it reaches the support level or the other way around to make a profit of the difference until Tasha told me about this^^!!!So I decided to use this strategy to bid a product…

According to the news that I read on bloomberg.com on Sep 14, 2011, Gerlach stated that the open market price of wheat will drop 3 to 5 cents on Sep 15, 2011. Although he also implies the supply of wheat will decrease due to the incoming cold weather condition in the U.S which causes the price to rebound later on, I still believe that the price of soybean will continue to decrease to a certain level before it bounds back since the trend of price of soybean is more steady than corn and wheat. We could observe that the price of soybean is still far away from its support point over a long period, so I decided to sell it before the price drops further. The way that I determine the price is to look at the open market price and the support point of the week. The open market price is around 1382 cents and the support point of the week is around 1380. I thought it will not drop below 1380 according to the trend, so I decided to take a short position of soybean at 1380 cents…

According to these strategies, I was able to get into the soybean market. The price that I bid was 0.4 cent lower than the open market price and earned some profits at the end of the day…

Profits from taking short position of Soybean: (2)(1380-1358.6)*50=2140

Margin Balance on Sep 14, 2011: 24100+2140=26240

For now, I just hope to do more researches about the prices, including any factors since I am very interested in this topic and really want to learn more:)

Hope all of us will enjoy the game lah…kkkkk…

Sources:

http://www.bloomberg.com/news/2011-09-14/corn-soybean-futures-called-lower-on-economic-concern-wheat-may-climb.html

http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn.html

http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/wheat.html

http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean.html