This week I insisted on my short-term trading strategy and get some deeper cognition.
Last week retrospect
I suffered from a great loss for 2 reasons last week. All of them derived from the right trend predictions but wrong trades.
1) Wheat
I anticipated a downward trend of wheat price and I shorted 10 contracts of wheat on $6.93. After 3 price movement I got an acceptable return. According to my lessons learnt last week, I rejected my “voracity” and placed an order to cover on $6.90. Unfortunately, it was Friday afternoon and the transaction stopped soon. The delayed transaction on $6.96 in the next Monday morning made me suffer a loss of $1750. This short-term transaction asserted a failure.
2) Feeder Cattle
It is actually a new kind of commodity to trade for me. I also estimated the price trend correctly but I placed the wrong order. It was a funny but sad story. I predicted the trend with the chart of Nov.13 feeder cattle contracts but I bought the Oct.13 feeder cattle contracts. (T_T) That made me suffer a $2325 loss.
This experience confirmed the strategy I mentioned in the blog’s lessons learnt part. “Choose my own best understanding and familiar commodities to trade.”
Do not try to catch up with the missed market
Wheat showed an amazing price movement these 2 days and I again missed this wave of market till the afternoon on Friday. The price of wheat (Dec.13) reached the highest since July. But the news shows that this price trend may not continue for long. As a short-term trader, once I miss the market, I cannot purchase it.
Highest price of Dec.13 Wheat since July
According to the trend, I cannot catch up with this wave of market which I missed.
There are some useful news link about the wheat.
Risk and strategy of short-term trade
Short-term trading helps investors to cultivate a keen sense of market trends so that we face daily challenges of the market without the burden, and thus maintain a good attitude. Of course, there are also short-term trading obvious defect, which is mentioned below.
On the one hand, once a commodity price trends established, the anticipated price movement in one direction will be a great distance after the formation. Short-term traders could have earned the profit by the fixed positions easily, but they have to divide the profit into a profitable short return. Thereby these kind of transaction greatly reduce the earnings rates as well as increasing the risk.
On the other hand, when one-sided market trends occurs, in order to prevent traders from large losses in case of the sudden price change by a wide margin, traders should not place orders only by short-term contrarian indicator.
How to play the advantages of short-term trading while overcome its inherent flaws should become the main issue to consider to be a good short-term investor. In my opinion, this is actually a problem of identifying the market trend and use a mixture strategy of trading. Long position fits for the clear trend in one direction; short-term trading might be a better mode of operation when the trend is not obvious to predict.
Look forward to next week trades based on these strategies.~