Week 4 Trading
This week, I decided to trade without using the BB terminal. I thought that it would allow me to step back and look at the bigger picture. But having got so used to information at my fingertips, I kept on thinking of the questions that the terminal would help me answer. So frustrating! Next week, I’ll be returning to the terminal.
Wheat-corn Spread Update
The wheat-corn spread further increased to $2.58 per bushel from last week’s $2.43. Over the last year, this spread only came close to this amount in January, when it peaked at $2.36. By contrast, in June, the spread only amounted to $1.48. Corn production and stocks higher than expected resulted in the decline of corn prices, while higher demand for wheat in China increased the price of wheat, explaining the increase in the spread. But, if these commodities really are demand substitutes, buyers should start switching to purchasing corn instead of wheat; the spread is just too large.
Week’s Review
No major news update relating to agricultural futures occurred this week.
Wheat initially increased, then decreased, and then returned at about the same level as the end of last week. A large downward movement followed by a symmetric upward movement occurred on Oct 11th-12th .
Corn started to climb at the beginning of the week and then fell at the end. Interestingly, the increases happened over a series of small steps while the decreases are deep and sudden. This pattern of small increases followed by deep decreases has been occurring throughout the year (see corn graphs below).
Soybeans declined sharply at the end of the week, ending with an inverted hammer patter, signaling a possible small trend reversal.
Note: the preceding graphs were taken from http://finviz.com/
Portfolio Performance & Lessons Learned
As the above graph shows, my portfolio continued to perform poorly.
Lesson Learned: Make more trades. I realized that I spend more time researching than actually making trading decisions. I only placed 6 transactions since the beginning of the trading game, some of which I held against my own analysis. I need to trust my analysis and start implementing trading decisions.