Lessons Learned – Week 4
I ended the week in not a bad position, despite the massive jump in prices after the USDA report was released on Thursday, but the progress I thought I’d made earlier this week on understanding what I’d convinced myself was a confusion about short and long trading was overturned. As it turns out, I hadn’t been confused at all before – I just convinced myself that my confused classmate was right.
Nevertheless, I proceeded to lose nearly $10,000 in one day, only to rebound the following day by more than half of that loss. I’m holding only short contracts, which seemed like a terrible idea at the end of the day on Thursday, but perhaps isn’t so bad in the medium to long-term.
(Above: Equity Balance for Week 4)
The prices jumped on October 11 because the USDA report saw smaller world supply. [1] However, this was offset quickly (seen in the recovery of prices on Friday) by a drop in demand for US exports, too. [2] According to Bloomberg, wheat is still overpriced, so I will stay in my short contracts and hope that drop was a short-term effect of the USDA report. After all, the CBOT reflects supply and demand on a global scale, and prices will likely recover after the USDA’s United States focused news and forecasts. Already, corn, wheat and soybeans prices are back down, with wheat and soybeans lower than they were before.