Mind Your ABCs

Always Be Closing. This classic sales mantra became my guiding principle as Monday morning shot off at a dizzying pace with the release of the USDA Grain Report. Not one to repeat my mistakes of last week, I was focused on the prize, or at least focused on the prospect of closing the huge deficit in my portfolio.

I got slaughtered last week. My portfolio was down around -15% and after some careful consideration, I decided the best strategy was to embrace the ABCs of sales and close, close, close.

As it turns out, futures trading is not like marathon running, it is much more like fartlek sessions – yeah, you read that right – fartleks (pronounced fart-licks, ah, so funny… and childish). Fartlek is Swedish for ‘speedplay’ and is an athletic training method that combines continuous training with interval training. However, unlike traditional interval training, it is characterized by unstructured intervals of varying intensities… much like the futures market.

This week was a perfect week to try out my Fartleks – Futures Style.
(not be confused with Gagnam style)

My goal was to open more positions, close more positions and try to close the deficit in my portfolio by trading when there was a flurry of activity, even if it meant only holding positions for short intervals.

So here’s how things played out:

Monday
Corn
I squared up my positions early Monday morning in respect to my predictions about the soon to be released USDA Grain Report. I expected it to be quite bearish on corn with expectations holding for a bumper crop due to record high yields across the US. Corn started to lose immediately following the report and closed at a 3 year low of 441.5.

ABCs: I was already short on corn contracts, but as the price began to slip, I shorted more contracts and held them for a few hours before covering 5 of my open positions. This brought me up to -11.8%! Moving in the right direction = fartlek success!

Wheat 
Wheat was bit harder to peg, especially given its big rally in the previous week. The most common prediction was that wheat would hold pretty steady and that the USDA report would leave acreage and yields largely unchanged. Given the prospects of a bad weather impacting supply in South America, and an estimated large world demand, I went long on wheat contracts (adding to the few that I already had). The USDA report was quite neutral leaving the current harvest and yield numbers as they stood, and wheat did gain in the hours after the report.

ABCs: Having made a slight profit, I promptly sold a few contracts and then decided to buy a few more as the price continue to gain. Prices varied mildly for a few days, and I sold out of my contracts yesterday morning for a tidy profit of 3.1%.

This futures fartlek technique has certainly helped me to close the gap in the portfolio so I will happily continue to chase the market when I see short term opportunity. I did execute a few more trades this week when there was an opportunity to play favourable odds (I bought and sold a few more wheat contracts, and profitably dabbled in soybeans for a day, riding the market highs), and at market close today my portfolio was still a dismal -6.59%, but much better than when the week opened. I am still shorting some corn at the moment, but given the bad weather forecasts for the final weeks of harvest, I might reverse my positions on Monday and try to cover my losses by snapping up a few extra corn contracts and selling them all at once. I do however, think that corn will trend downwards in the longer run, so getting out while to going is good will be very important if I chose this option.

Since the Republican’s extremist wing has decided to throw tea in the face of good governance and have shirked their legislative responsibilities, not a lot is happening in Washington these days. There is a severe shortage of information about harvests as the USDA and other government institutions are off the job until the an agreement is reached. The markets have not had a dramatic reaction to the government shutdown, but I expect this is the calm before the storm and that the markets will be in for a tumultuous few days when the government gets back to work, at this point however, there is no clear indication of when business will be back to usual in Washington.

As rewarding as Fartleks have been this week, they are very tiring, so I am happy the markets are closed for the weekend. But come Monday market open, training season is back on and I’ve got my sights set on getting back to black.