Impulsion is devil. I went long on a December 2013 contract of corn at $4.59 per bushel on September 18th. The next morning I found that I have earned about $2000 (2% return) and the price started to drop, so I swiftly sold to close at $4.63. At that moment, I really thought I was already a pro at futures trading but things began to go south. After I sold my corn, I noticed that soybeans price has dropped sharply and it was close to the 5-day low ($13.47). So I bought some soybean and nearly fell off my chair when I checked the price again during noon ($13.32). I became a desperate gambler and all I had in mind is to earn my money back. I bought corn again impulsively due to a sharp decrease in price ($4.57). Today, I bought more soybeans at $13.17 in hopes of decreasing my average soybean bid price. The closing prices of corn and soybeans were $4.51 and $13.17 respectively. As a result, I have suffered a loss of $9,174 this week and my ending portfolio value is $90,826. Here is my sad Trade and Portfolio Summary (1st Week)
Ok, I admit it that I messed up in the first week of trading. I didn’t know what to do and I didn’t invest the time and effort to learn what I should do. I thought futures trading is quite similar to gambling, so I utilized my experience in Vegas but things didn’t work out quite as I expected. Therefore, I came to the conclusion that there must be some differences between trading and gambling.
Success is not final, failure is not fatal. After some research work, I have several reasons that caused my temporary victory and the terrible defeat later. First, an economy still stumbling toward recovery was not enough to sway the Federal Reserve, which defied market expectations Wednesday and said it will not begin pulling back on its monthly asset-purchasing program. The release of this Federal Open Market Committee statement at 2:00 PM EST on September 18th contributed to the rapid increase of corn prices in the next two days. So I accidentally made the right choice to buy corn on Wednesday.
Today, after I bought about $30,000 of soybeans, soybean futures dropped to the lowest in four weeks, why? Simply because of the speculation that U.S. yield potential may improve after recent rains and a reduced threat of freezing temperatures. In addition, the USDA Crop Production Report released on September 12 also continues to depress the corn price.
Trading is all about information. If I did my research beforehand, I believe that my portfolio summary would look a lot better. Next week, I will set a stop price for my corn and soybean to limit my loss and I will definitely do some market research and analysis before I make any move. No more Vegas!
Here is some information sources I’m finding useful:
http://www.federalreserve.gov/newsevents/
The macro is really tough to call, Mike, so don’t feel disheartened. What I do on days like these with lots of macro events happening is to go cycling and just stay out of the markets. I learned the hard way (with real money) that my emotions tend to get the better of me. There’s also great opportunity if you manage to keep your wits when every around you just gone nuts.
Thanks for the tips! I will definitely try it!