Just don’t make enough these days. My portfolio balance has dropped in the last two trading because I made some significant mistakes, though I take the positives from them. I have learnt to believe that prices are as unpredictable as anything no matter how well you think you understand them. Price movement follows a random walk. I just hope one day I would become a better broker from where i left off.

I was observing wheat, soybean and corn contracts simultaneously since Monday. I wanted to be able end my trading on a high note. So I did quite some research about the weather and some political news that i though were  going to have impact on the market. What did I find? There is good planting ongoing for winter wheat and smooth harvesting for soybean in the United States. So I expected that with this news there were going to be market reaction to speculative demand for wheat and soybean. Specifically, there would be lower prices for them in future because of anticipated good harvest.  So i went to offset my previously short soybean contracts.

How I wish I had done some more technical analysis stuff to back my prediction. My positions were delayed so i made losses. In all, I made about 1.57% losses and my portfolio balance stands at stands at $98,427.93

This weak trading has been a bit not too good in my opinion. I did do some gambles observing how the market prices were going. However, my predictions were far from correct.

Though there was declining pattern in wheat contract prices, at a point in time, this was beginning to revert back to an increasing trend so I longed. I observed the same pattern with Soybean contract and longed as well.  The reason why this was beginning to take an increasing pattern, in my opinion, could be due to the re-opening of US government because I felt that was some favourable news which could boots traders confidence. News about China increasing imports of soybean further consolidated my thinking that prices were going to shoot up. However, this did not seem to have an impact on commodity futures as prices continually dropped.

My portfolio balance dropped as prices further declined against my predictions. So I loss about 14 000 dollars on my general trading. My portfolio balance stands at $107, 534.78 and my return on investment stands at 7.53%, as against 23% returns last week.  I guess I still have some difficulty with the trading game because I wanted to buy corn contract as well but it wouldn’t just pick upon several trials though i saw that its trends were rising.

Friends, I must say that this was the week I actually understood what the whole trading was about. Earlier on, I knew that when you expected prices to increase, then you take a long position. Conversely, an anticipation that price might go down then you take a shot position. One big thing I didn’t know was how profits were made on each position. For example, I didn’t know that if you took a long position as a speculator because you anticipate a price increase, then you must resell your contract when price have gone up in order to make the profit.

So to me, I long when I anticipate a price increase and shot when I anticipate a price decrease. So all along, it didn’t make sense to me. That was pretty much it. The logic wasn’t just adding up. How can I just take a long position and sit down doing nothing and wake up one day to see profits on my portfolio. What happened and how did it happen? I was never sure and at a point felt that I still didn’t understand what I was doing.

You may wonder how I found out. I asked the Prof this week during our Futures Market lessons for further clarification. That was when I got to know that a long position must be shot again in order to make the profit just as a shot position must be longed to capture the profits.

I then asked myself, where were all the returns I made in the previous trades come from? Because I only took long positions without reselling. And when I expected price to go down, I took short positions without going to long again. I still wonder.

After the Prof’s explanations, I went to check my transaction records and realised that some of the contracts I had longed could be resold. Because I found out that wheat price had increased beyond what i bought. So i immediately resold my wheat contracts. Similarly, I resold my previously shot soybeans contracts because prices further declined. Though I had read in the news about USDA crop report, I was convinced the best way to making my money back was to resell/shot my previously contracts.

As at now, my portfolio balance stands at $123, 881.80 with 23.88% returns. In fact, this is the best I have ever gained.

This week’s trading was really one of the challenging I have faced. Because I had no priori outstanding market indicators as to how markets were going to move. The same old news of poor harvest in China, drought in United States and anticipation of its likely impacts guided my decisions.

I would like to acknowledge that though I watched and read the United States government shut-down news, I didn’t think this had a dramatic toll on the futures market. One thing I however saw was that the Agricultural Commodity Funds showed marginal changes and in some cases it declined. For example,  Teaucrium CORN declined by 0.12% . This suggested to me that the demand for futures contracts were going to respond in similar manner.

However, considering the currency market, the US dollar, the Great Britain Pound and the Canadian dollar all dropped in value. Metals fell as well. This suggested to me that the fears of government shut-down were beginning to decrease investor confidence.

I accordingly saw that Soybean contracts were declining on futures trade on the 2^nd of October. However, the cycles were showing much deeper loops. So I short it by noon. Unlike Soybean, wheat prices were increasing. So I bought 5 contracts of wheat. In all I made 8.39% returns and my portfolio value stands at $108, 192.88.

Big gamble …. Bigger loses in Wheat, Corn and Soybean!

The drought in mid-July in the United States raised speculators anticipation that there was going to be shortage of wheat in the market. Then the news of good weather for commodity harvest in the United States, the eased Syria tension reduced stressed on crude oil and the FED reserve report filtered in. I think I learnt much from friends’ blogs that these were some of the factors that suppressed commodity prices on futures trading last week. Thanks guys!

What about this week?  Most of it seems to emanate from observations about major weather conditions and seemingly policy changes in China. China is not just China; China is one of leading importers of these commodities except soy.

       Anticipating China is going to need more wheat and Corn? Yes!

There’s almost a U-turn in China’s decision on food sufficiency in which it wish to be self-sufficient in major staples such as wheat and corn. However, with the large crop failure it observed this year, there is an anticipation that the Chinese economy could depend largely on imports. According to the financial times, Beijing has officially admitted that it anticipates importing about 20million tonnes of wheat next year. Besides, China has already allowed imports of corn from Argentina for the first time this year and Ukraine is expected to ship its first ever consignment to China this year as well. Reasons are that China couldn’t depend solely on United States which has also suffered major droughts in 2012 for its import (http://www.ft.com/cms/s/0/4d738f8e-19f5-11e3-93e8-00144feab7de.html#axzz2g2NuqIwG). Also, there’s news of bad seeding weather for Wheat in Ukraine implying that one of the major producers would be affected next year. Speculators have therefore responded highly to this information.

      How did this influence my trading? Bigger buys!

First of all, I observed that the futures contract shored up significantly on CBOT for Wheat, Corn and Soybean on average, though soybean later declined. From Monday through to Thursday 4pm, there were accompanying massive increases in Agricultural Commodity investment funds: 0.7% for CORN, and 0.14% for WEAT while SOYB declined by 0.27%. So I anticipated that this was going to rise further at least before trading ends on Friday 2.00.am. I accordingly bought 10 contracts each of December for Wheat and Corn and short Soybean.   Unfortunately I made losses and my portfolio value stands at $$99,525.41 with a negative return on trade of about 0.47% as shown in the Table below.

The price of soybeans and soybean oil has been declining on the CBOT. In the last three days, it declined by 9.0 points. This is because there is an expectation that soybean supply will increase soon as a result of ongoing harvesting in the United States and therefore put a downward pressure on prices. While this increase aggression among producers and speculators to offload any stocks that have been previously acquired before prices run-down, there is no similar amount of aggression among consumers and soybean processors to buy because they still expect prices to fall further than the current level. In view of this I thought the prices would continually decline for a while. So I short 5 contracts of soybean and earned an interest of $32.0.

With this unexpected increase in corn yield in the United States, corn prices are expected to decline in the present and future. However, if lots of the harvested corn is consumed in the bio-fuels, then it would be the case that prices might rise in the months to come.