Trade and portfolio summary

This week my portfolio value finally changed from deficit to profit, gaining a 2.48% return up to Friday morning. My limit order of selling wheat came into effect, which contributed a lot to my return. And I also shorted 2 units of wheat at the price of 6.735, forecasting a tendency of dropping in the near few days. (Though the fact is that there was a continuous rise in the price of wheat.) I’ve set 3 limit orders this week, but none of them were filled because of my wrong judgement of the market.

Why make these decisions and what I’ve learnt?

1.Something about U.S. crude oil

U.S. crude oil ended lower for a fourth straight Tuesday, as the geopolitical tensions in the Middle East easing. The gradually thawing relations between Iran and U.S. directly rendered the decrease of oil demand and price. Thus, I regarded it as a sign of declining in corn’s price and bought corns at the price of 4.5675 which was a quite low price. I was prepared to make the investment in a long run. Plus, the US crude oil report released by EIA (the U.S. Energy Information Administration) this Wednesday morning sent the price tumbling for its increased inventory. I guessed there would be fluctuations this week in the corn’s price.

2.Why wheat price soared at the end of the week

The higher price largely resulted from the strong export demand and problems with Argentina’s winter crop. As Argentina is a major world supplier of wheat, corn and soybeans, the concerns of cold snap may have some influences on the fluctuation in wheat price. The kind of unpredictable factor made the commodity market prices volatile and hard to control. Tomas Parenti, the weather expert at the Rossario grains exchange, said via the media that “The leaves on some of the more susceptible varieties (of wheat) may have suffered from the cold, but the plants themselves can recuperate.” Thus, the effect may not last for a long time. I still stand the point that wheat price is the most stable one among the three crops. When I trade corns and soybeans, I always tend to be more cautious, for there’s too many drivers that can influence the price, ranging from the politics to the weather, from the oil price to the related rumors.

Conclusion & strategy for next week

This week the limit order set last week helped me a lot in trading timely at the ideal price, though I failed to win more because of the unpredictable driver. I’m inclined to be a conservative trader making options on ground of data and facts rather than a gambler hoping for a fat profit without doing anything.

Next week, I will start focusing on the Federal Reserve’s next move on its monetary policy at its meeting in October, and continue to observe the influences from the crude oil price.

Good luck~

Vanilla

The future trading of agricultural goods is a very fresh and challenging thing for me, I guess for most of us. Before I got to know my new friend—Stocktrak, it made me nervous with its profession and complexity. I have been at a loss until I “googled” concepts like what’s limit orders, what’s stop orders, what’s GTD and GTC, etc. After these steps, I finally became a little bit relieved. I found that the trading was similar to the precious metal trading I did during my undergraduate study. The principle is the same, buying at a lower price and selling at a higher price.

After information searching, I got to know some tips when trading for the future contract. A market order won’t be preferred when there’s a low average daily volume in the market. Because it tends to make you end up paying more than you originally anticipated. And the stop order will help you to execute at the price that you ask for, but not to guarantee the price. In other word, the order won’t guarantee your payment or receipts.

As a completely green hand, I tried to make my first trading for future by observing the past and current agricultural market. And the news told that the corn prices were down more than 3% after the USDA unexpectedly increased its corn yield estimates. And the agency is now predicting that 2012 would be the greatest yield since 2009. Maize, as an essential biofuel feedstock, has been experiencing volatility over the past few years. The fuel market has a strong impact on maize market. Compared with the rate of change in wheat’s price, that in maize’s price tends to be more unstable. (Graph1.1) Thus, for my first

Graph1.1

trade, I tend to buy more wheat instead of corns. In this week, we can see that the change of the price of corns was more unstable than that of the price of wheat. Thus, I tried to figure out which factor had such an influence on corn’s price.

I found a piece of news on crude oil, there’s a 2.5% soar in the market. (Resource from: http://www.lse.co.uk/AllNews.asp?code=tcxm5f5q&headline=Crude_Oil_Surges_25_On_Fed_Decision_Supply_Data)It has resulted in the constantly drop of oil’s price. (Graph1.2) Will it correspondingly affect the price of agricultural commodities? Within this week, the price of maize has dropped dramatically since Sep.20. (Graph 1.3) Empirically, the change of the price of crude oil should be in line with that of corn and soybeans. And the fact is that the price of corns has been affected by the price of crude oil and still in the status of low prices.  I’ll keep observing the price tendency of corns next week and find out other factors that will influence the market of corns.

Graph 1.2Graph 1.3

In conclusion, the trade in this week was not good enough. But I tried to connect different sources of information with the agricultural market. As a freshman, I decided to make my decisions based on news and price tendency. Gradually, I’ll start to use more analysis tools and professional knowledge to make deals.

Vanilla Chen

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