• “U.S. wheat eyes biggest weekly gain in 14-months”

— let’s buy some wheat!

During the first week of our great trading game, I was totally comfortable with sitting at the bottom of the raking list with my poor -12.83% portfolio return, admiring friends make loans of money at +12.83% portfolio return…

This week I logged in my account in the same mood and suddenly something big happened – there are some numbers in green waving to me. Immediately, I thanked God and tried to seize the hope that finally appeared in my trading life.

As we all known by far, the price of wheat soaring into the sky this week, buoyed by expectations of strong demand from China (my lovely mother land) and Brazil. This huge increase leads my portfolio value to rise from $87,167.44 to $104,909.93.

• “Conservative angel VS. Adventurous devil”

— Buy more wheat and try to sell some corn and soybean

 I can’t wait to share some transactions I did during the second week.

Firstly, motivated by the increasing tendency, I bought 9 units of wheat future and ended up with totally 15 units, which bring me $16,350 profit. I didn’t buy it as soon as I found the price is rising, instead I waited for small decreasing moment and then held some long positions (sorry for doing this during class, BTW once you are in the future market, it’s really hard to move your eyes from the big broad).

Secondly, I shorted and covered some soybean oil (about 1 or 2 unit) as some one in my mind told me I should try new things. It was kind of funny as I pretend to a professional speculator who buy low and sell high all the day. But it didn’t work well because of my patience. Anyway, good try.

Thirdly,  I tried hard to stop bleeding because of the decrease in soybean (always) and corn. As staying with a negative portfolio return for a long time, I realized it would be a long time to go back to the original price. So I decided to lose a little money instead of much.  As there was a slightly increase of the prices. I sold them in two times, each time I sold half and set different market limit prices, for example 2 units at $4.5 and another 2 units at $4.53. As a result, I reduced my huge lost.

 Lesson 1: Don’t make any decision as you see the price is going up. You can never be too patient to trade futures. Don’t hurry and spend some time to figure out what is the real trend of the market price.

Lesson 2: It’s OK to try something new but it’s highly that do some research first, to know what is it and what’s the main factors that will affect the price.

Lesson 3: Set a strict base line for the amount of lost. Once the lost is more that, you sell it no matter the price since it would cost you more in the future. The base line could be -5% of return and according to my experience -10% would be the maximum.

• News highlight “weather” & Signals for the coming week

News for this week mainly focus on the weather also it’s the main reason for huge increase in wheat market. But for how long would this trend last when the USDA releases the next crop report on Sept. 30th? I doubt it.

“Argentine worries” – It’s reported that there would be frost and droughts in Argentina, the southern hemisphere’s second-ranked supplier. This unfavorable weather conditions supposed to slow wheat seeding and affect the whole market.

“Chinese signal” – China’s domestic wheat prices have reached record levels, ending at 2858 yuan a tonne on Friday because of the droughts at  the central and eastern regions of China. As the world’s biggest wheat consumer, China may increase imports to boost stockpiles and help curb record gains in local price, Shanghai JC intelligence Co. said.

“Abundant Soybeans” – the U.S. Midwest is forecast to remain mostly dry in the next three day, according to World Ag Weather. Drier weather this week will favor harvests, so it seems that to short soybean would be a good choice for this coming harvest season. Let’s wait for the crop report from USDA.

As for next week, I will do some research about soybean oil and try to take some right actions on it. Further more, I think it would be helpful to pay close attention to the crop report released by USDA since it would say a lot about demand and supply situations of the world. As for wheat, I think it may not keep the increasing trend like this week for too long, so I would also keep an eye on it. The most important thing is to read news every morning and trade after you have some ideas about the market. Trade early and trade often!

Mia

What did I bought

Really inspired by the suggestion that “make as many mistakes as you can:, I just closed my eyes and jumped into the future market.

The first trade was made on Sept. 18. After watching some guide videos on Youtube and with help from classmates and Google, I bought corn, wheat and soy beans just based upon personal interest.

Unfortunately, it seems that my choices are not so good, with the portfolio return at -13.96%. Surprisingly, the  portfolio return of major class turned out to be negative when I opened computer this morning, but still, mine is the lowest (sorry about my poor trading skills), it makes me so curious about what happened in the market.

Here I’d like to keep track of my adventure in Stocktark

My first trade

Top 3 mistakes I made this trading week.

• With no ideas about the future market
• Don’t understand why and how commodity prices move higher or lower
• Did not figure out what percentage of money should spend on futures

In a word, I started buying and selling with no specific market strategy. But now I am getting to know the market.

Unlike stocks or other futures, the agricultural commodity futures are more sensitive to the harvest season and demand-supply situations. Take corn as an example, corn crops around the world have their own unique production cycles of planting and harvest time-frames. Generally speaking, corn is planted in the spring and harvested in the fall. While the supply expectations often shift significantly due to weather and growing conditions in growing season, the winter months usually deal with demand and supply of the harvested crop. So it turns out that the summer months is when most of the action in corn prices take place, however, corn futures can be fairly subdued during the winter months.

So I realized that awareness of seasonal trade would be helpful when buy or sell agricultural commodities. Since the northern hemisphere is waiting for the beautiful winter, we may need to pay more attention to the demand and supply situations of the whole market.

Here, I’d like to share some resource we can access to the demand and supply situations in US.

• Prospective plantings – the main report at the beginning of the crop growing season from USDA. It is released around the end of March since 1964 and summarizes how much and which crops the farmers expect to plant for the upcoming season.
•  Monthly Crop Production – Released around the 10th of each month. The report gives an update estimate of supply and demand for crop.
• Grain Stocks – Provides information on the current supply of corn and other grains in the US and the world.

The big news in agricultural futures this month

Interestingly, the price curves of corn, soybean and wheat all experienced a huge but different change on last Friday.

The changes are instant responses to the big news released on Spet. 12 – the USDA raised its outlook for the domestic harvest and projected US farmers to harvest 13.843 billion of corn this year, which exceeds the forecast made in August and would be the highest number ever. Also private analytic firm Informa Economics raised its forecast of US 2013 corn and soybean production, estimated the 2013 corn crop at 13.889 billion bushels, which above the USDA’s forest for 13.843 billion bushels.

The new domestic harvest data from USDA implies that there would be a good corn production this year and plenty of corn are available. As a result, corn futures for December delivery drop 1.7 percent to around $4.514 a bushel in CBOT, heading for a third straight weekly drop. The falling wedge may not necessarily be an ending pattern. Therefore, it seems it is not a good time to buy too many units of corn future.

Likely, the soybean dropped most in week but the trend is more likely because of the weather. It is reported that field from North Dakota to Ohio (key growing area) got as much as 2.5 cm of rain last week. Rainfall may aid some immature crops filling pods with beans. The USDA said on Sept. 12 that the global production of oil seeds including soybeans, canola and sunflower seeds will rise 4.8% this year. Abundant supply makes the soybean future for delivery in November fell 1.5% to close at $13.2 a bushel on CBOT after touching the lowest point around $13.12 since Aug.29.

Take a little break

After the first trade, all I wanna say is that  it’s so wise to trade with fake money.

The price of future is changing all the time and there are so many factors, such as policy, harvest season, storage, imports and exports, demand and supply etc., can lead to big increase or decrease of the price. I think it would definitely take me some time to understand why commodity prices move up and down.

For next step, I will keep an eye on my soybean futures since it is the chief culprit of the lost and then to have a better understanding about how to choose short position and long position. Still many things to learn and more practice is necessary.

Mia