Month: September 2013

Another busy week has gone, but the situation is not so good for my trading, because I am still involved in the trade of soybean with a negative return. (The graphs presented below is my portfolio summary.)

 

 

 

 

 

 

According to the news, due to area expansion and the weather condition, the estimated yield of soybean is going up. Usually, the production and supply have great impact on the price, therefore, I decided to short a couple of units because of my expectation on a falling tendency. Then, I faced the dilemma that short order must not conflict with an existing “long” position. That is to say, I had to sell the soybean I bought before with negative profit, and definitely I would lose a lot of money. But I did want to seize the opportunity to earn more, since the expected production showed quite a certain trend of decline on soybean price. I pulled out to short, which caused me a loss at $1985 for just 1 unit (bought it at $13.54). The next day after I made the deal, I found it was an extremely bad decision, because the price of soybean started growing up, which totally went the opposite direction as expected…dilemma again, pull out or calm down? I suffer another loss at $1245 when I decided to cover two of contracts to make a clearance. This week sucked, I stopped trading after these tremendous loss and I am still figuring out the plan for next week. (The graph below shows the price trend of soybean.)

 

 

 

 

 

 

So what I learned from this week?  I think I cannot trust so much on the effect of supply on the future price, because the estimated supply is also figured out by uncertainty. When I use uncertainty to predict the future, the outcome will be definitely uncertain. Also, I am supposed to focus on micro and macro (no longer yield-oriented prediction only and pay attention to other factors). As a trader making money off of price movements, maybe I can just focus on the movement of price to make a quick money (like what we do on stock). Additionally, in order to lower the risk, I should no longer put all my eggs on a basket. Hope I can make a break-even next week.

BTW, share a new place to get agricultural news which I believe is better than Bloomberg.

Here you go:

http://www.agrimoney.com/1/commodities/.

Good luck next week!

I start my trading venture on Tuesday afternoon. To be totally honest I have no idea how to deal with the trading game, since it is my first time doing it. So, After a quick viewing the price trend line, I believed that the price of soybean was almost at the bottom for these month. Therefore, I placed my first order of buying 10 units of soybean (buy to open).

 

(Source: http://www.cmegroup.com/popup/mdq2.html?code=ZCZ3&title=December_2013_Corn&type=p#link=daily)

 

However, Mark told me 10 units was too many!!! Because the contract size was 5,000 bushels (~136 metric tons), which means you would be responsible for buying those quantities of soybean at the amount around 650 thousands (we merely had 100 thousands dollar). I was astonished by such a big deal I have made because I am definitely not a risk lover!!! Fortunately, the trade I made is not successfully processed, because any trade made after 4.00 p.m. ET would be processed next day (excellent!!). Absolutely, I canceled it and reordered a new trade of buying 1 unit of soybean. On Wednesday, after checking my account, I was regret to know the price sharply went down (can’t imagine the tremendous loss if I made a deal of 10 units).  But I think I will hold it or buy one more unit next week , as the trend line shows its price is already at the lowest , and then short to close at a slight increase.

 

(My current account status)

 

Up to now, the price of soybean is still falling. I read some reports about the reason for the decrease of current soybean price and did a brief summary as follow:

1. The pressure on soybean harvest in this season

2. Position squaring of funds due to the rainfall on middle west

3.  The slowdown in demand of international market

4.  The announced increasing cultivated area of soybean in 2014 and 2015

 

By the way, in order to have a well-rounded understanding of the future trading and to be a wise investor, I think I am supposed to do some readings about the basic knowledge of trading game such as the terms and the skill of forecasting and pay more attention on the agricultural policy which is likely to have a great impact on the price of the commodities.

 

Finally, share a few useful websites:

http://www.wikinvest.com/wiki/Futures

http://www.reuters.com/finance/commodities

http://www.bloomberg.com/markets/commodities/futures/agriculture/

http://finance.sina.com.cn/futuremarket/ (in Chinese)

 

 

 

Reference:

http://www.bloomberg.com/news/2013-07-29/corn-declines-to-33-month-low-on-record-u-s-crop-soybeans-drop.html

http://www.agri-pulse.com/Corn-soybean-prices-projected-to-increase-USDA-says-08122013.asp

http://www.cmegroup.com/popup/mdq2.html?code=ZCZ3&title=December_2013_Corn&type=p#link=daily

 

 

 

 

Thanks for reading

Sang Sheng

09/20/2013