Category Archives: Futures Trading Game

I have been trying to pull out of my short positions on corn for the whole week in order to make my final portfolio looks better, but I failed. I missed the only window on Tuesday and the price never drop fell back again.

The crop markets started the week on a firm note. On Monday, wheat strength seemed to boost corn futures Sunday night. There was little weekend news concerning corn, with traders most often citing harvest pressure as limiting short-term rallies. Nevertheless, prices rose moderately in early-week trading, which very likely represented strength spilling over from the wheat markets. Although there was a sudden drop in the late Monday morning, the weekly Export Inspections report, along with strong soybean gains brought the corn market back.

On Tuesday, Corn futures moved lower on improved crop condition ratings and expectations for higher yield estimates. Farmer selling also seemed to pick up. USDA reported national harvest progress at 39% still well below the ten year average at 54%. At this rate of harvest completion the market perceives more seasonal pressure ahead. December futures lost 5.75 cents to $4.3825, which is the only opportunity for me to clear my contracts and end up with a not too bad portfolio, but I messed up.

Corn futures built on overnight gains Wednesday morning. Bullish corn traders were reportedly reacting to steady cash quotes this morning, with current harvest delays apparently limiting immediately available supplies. Concurrent wheat and soy gains may also be encouraging buying. Overnight into Thursday, corn futures were moderately lower. Bulls seemingly focused upon continued U.S. dollar slippage and its potentially positive impact upon demand, whereas bears argued that fine weather will allow the Corn Belt harvest to accelerate during the days ahead.

Even though we are not required to trade from now on, I will try my best to experiment with the system until the end of the term. I believe the strategy for myself and for others who plan to continue trading for a few more weeks must combine what we have learnt in our courses, such as technical analysis, market analysis, forecasting, and etc. in order to make informed decisions.

Good luck to you all!

I continued with my short positions on corn this week by holding onto ten December 2013 contract and ten March 2014 contract. I was hoping that the price of corn will continue to drop due to the larger than expected harvest this year. However, things didn’t go as planned.

Although seasonal pressure stemming from the ongoing harvest is probably weighing upon corn futures, corn rose modestly Monday morning. That very likely represented a response to strength spilling over from the soy complex. December corn futures edged up 1.5 cents to $4.3475/bushel by late Monday morning. So what happened to the soy complex, which messed up my plan? I found that rumors of Chinese buying reportedly boosted the soy complex Monday. Although there has been no official news during the government shutdown, persistent rumors of Chinese buying are apparently pushing soybean and product prices to start the week. Ideas that last Friday’s drop was overdone may also be encouraging buyers. Concerns about wet weather hanging over the Corn Belt and its potential impact upon the fall harvest boosted corn prices as well.

Another major contributing factor to this increase in corn price is the U.S. dollar weakness. The federal government shutdown ended late Wednesday evening, which seemingly caused a surprising drop in the value of the U.S. dollar. The commodity sector generally rallied in response, with corn futures moving modestly higher. Bulls were also encouraged by a private report that China bought over 1.0 million tonnes during early October.

Chinese news and dollar slippage also boosted soybeans. Chinese officials announced had sold 281,783 tonnes of soybeans from reserves, which represented over 56% of the total offered. That seemingly implies robust demand. I think the price of soybean will continue to rebound especially when combined with the bullish aspects of the dollar breakdown, so I went long on November soybean on Wednesday and I finally made a right prediction this time.

Have a great weekend!

First, I have to confess that I did not trade anything this week. One reason is that the program got me so busy with things such as assignments, projects, cases, you know what I’m saying…so I did not have the time to do my research on the market. Thus, I would rather make no decision than make a blind decision. Another reason is that I was unable to offset my short position in corn, I still held ten December 2013 corn contracts and ten March 2014 corn contracts. I thought the price of corn would continue to drop when I bought them, but it actually shot up last week and up again at the beginning of this week.

Without new market and policy information, the only thing I can do is to completely trust my original analysis and decision from last week, which is to stick with the short positions and hope for the best. Luckily, the corn prices finally begin to drop on Tuesday for some reason and continue to slide for the rest of the week. The highest price of corn this week is $4.49 per bushel and the closing price this Friday is $4.33 per bushel.

As a result, my portfolio value grew back to $98,317 from $88,000 at the beginning of the week. Although I’m pretty happy with the fact that I have got most of my money back, I don’t feel successful because this not a result of my effort. I just sit there and hoped for this to happen, and it actually happened but I don’t even know why!

Lessons learned this week:

1. Sometimes, luck plays quite a big part in a person’s success.
2. Start to work on things early, do not leave it to the last minute (or you won’t have enough time to do research and trade)

Next week, I swear I will do my research and trade!

And hopefully do well on the midterm.

As you can see, things were pretty bad for the past week. It is simply because I was too cautious and reacted too slowly to the USDA grain stocks report.

On Monday morning, everyone in class was talking about the release of the USDA reports and how the market crashed, “I will not do anything impulsive this time, I will be smart this time, and I will read some analysis on the report before I make any transactions,” I thought to myself. So I wait and wait, and finally I got home. After doing some research, I found that the whole grain commodity market is depressed by the report. The quarterly USDA Grain Stocks report stated September 1 U.S. corn inventories at 824 million bushels, which easily topped forecasts averaging around 680 million. Thus, it wasn’t at all surprising to see futures react badly, since that implies 2012/13 carryout stocks were larger than expected. December corn fell 12.5 cents and settled at $4.415 per bushel. Same thing also happened to soybeans, people expected the report to state September 1 U.S. soybean stockpiles at 124 million bushels, but the USDA put that actual figure at 141 million. November soybeans settled 37 cents lower at $12.83/bushel. I thought it would be a brilliant idea to short both corn and soybeans and cover them when the prices fell more. However, when I was trying to execute the plan, I saw both corn and soybeans were actually rebounding. So I decided to wait until tomorrow to see what will happen and maybe I can short at a higher price, which never happened.

The prices continue to drop on Tuesday and I did not really have the time to keep track of it all the time because I was focusing on the video project… After I got home, I found that the corn price was even lower than Monday ($4.36) and an analysis were saying that December corn futures is going to dip to near $4.25 or lower. And the worst part is that I actually believed this smart dude. I sold to close my long position on corn at a lost (in order to short it) and shorted about $20,000 of corn that night.

The price rebounded again after Tuesday night, and it never drop back after that. On Wednesday, U.S. dollar weakness supported commodity prices since that lowers the cost of U.S. goods to export customers, thereby encouraging export demand. On Thursday, prices continued to rise because the U.N. Food & Agriculture Organization (FAO) reduced its prediction for 2014 small grain carryout approximately 2 percent Wednesday night. When combined with talk that the storm system now moving across the Great Plains will bring strong winds with it, thereby posing a danger to drying corn stalks, traders viewed the news as supportive of corn prices.

Lastly, I just want to say I was so fortunate that I did not short soybeans together with corn on Tuesday night because soybeans price went up even higher. At a time like this, I have to look on the bright side of things, like how bad could things be? I still got about $88,000 left…

Lessons I have learned this week:

1. Although impulsion is devil, being overly cautious will also result in failure. You will miss the right opportunity, sometimes forever.
2. Never trust any professional/analysis completely
3. Always look on the bright side of things

Next week, I will look for opportunities to cover my short position on corn. But if price continues to rise, I will set a stop order to avoid further losses.

Week 1 gave me a crash course in futures trading and the tuition was not cheap ($9174). I was kind of discouraged and decided to stay out of the markets for a couple of days. So I continued to hold my corn and soybean from last week (both losing money) without making any transactions until halfway through the week. On Wednesday night, I surprisingly found that there was a sudden jump of commodity prices during the day. I thought there might be a chance for me to get my money back, so I decided to get back in action.

After doing some research, I found that this is all because of something really good happened to wheat, and it consequently leads to an upswing of the whole grain market. The China National Grain and Oils Information Center said in a report that China is likely to import 7.5 MMT of wheat in 2013/14. If realized, it would be the most imports since 1995/96. USDA currently forecasts China’s imports at 9.5 MMT. Wheat futures for delivery in December jumped 1.9 percent to close at $6.705 a bushel at 11:15 a.m. on the Chicago Board of Trade, a four-week high. In addition, the production concerns in Argentina and improved prospects for U.S. exports also contributed to this increase. A frost early in the week could harm Argentina’s wheat crop and reduce the world’s exportable supply.

Although surging wheat prices boosted corn futures, corn also has some good news about itself. In the latest “U.S. Export Sales” report, the USDA shows corn climbing for its third consecutive week to 640,100 metric tons (MT) for 2013/2014, up 46 percent from last week.

So, I bought more corn at $4.55 per bushel on Wednesday night. At the same time, I put a limit sell order at $4.80 to sell all my corns. The corn price fluctuated a lot during the next 2 days (as low as $4.51) and finally got to $4.59 for a brief moment this morning. I think this is my biggest success this week which brought my portfolio % return from -14.42% back to -3.92%. Here is my trade and portfolio summary for this week:

I have learned two lessons this week:

1. Don’t just read North America news, international news also play an important role in predicting the market’s movement.
2. I got this one from Mark: Macro is really tough to call, so when lots of macro events are happening, just stay out of the markets. If you manage to keep your wits (don’t be emotional), you will see great opportunity.

I will keep an eye on the release of the USDA’s next Grain Stocks reports on Monday, September 30^th. This will definitely cause another round of predictions, fluctuations, frustrations, and etc.

Here is a new website I found this week, hope it’s useful: http://agfax.com/

Looking forward to round 3.

Impulsion is devil. I went long on a December 2013 contract of corn at $4.59 per bushel on September 18^th. 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 18^th 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/

http://www.agprofessional.com/

http://cornandsoybeandigest.com/