On October 18th 2012, I re-entered the market, with an expectation that corn prices would continue to increase in the next couple days. As I read through the commodity news on Huff Business Post, the commentator indicated that soybean, corn, and wheat prices will rise as some South American farming regions either get too much or not enough rain, particularly Brazil and Argentina.
In the case for Argentina, there has been too much rain in the wheat and corn growing regions, whereas Brazil was experiencing a problem of a lack of rain.
By taking a long position, I have made a small gain of $275.00 on one contract when the price in was $755.25, and price rises to $760.75. This helped me to increase my equity to from $27464.80 to $27739.80.
Thus, I was satisfied with my investment decision. However, if I were more confident, I could have invested on more long contracts to offset the huge losses of $12,536 in the past week.
I then decided to take on a short position since China’s economic slump signals a lower import in food supplies and raw materials. According to Huff Business Post on Oct 18, China’s economy grew 7.4% in July through September which was slower than 7.6% growth rate in the second quarter last year.
Although the corn futures were on the rise on Thursday, investors become increasingly concerned about the slowdown of global demand due to lower growth in the global economy. Thus, it is valid to take into consideration how the slowdown in quarterly growth in the Chinese economy relative to the previous year when I was making my investment decision.
At the end of Friday, when I checked my trade account balance, I made a loss of $100. Ultimately, I did not do very well on my investments. There is almost no gain, no loss. After all, I have only gained $175.00 from my previous long position on corn. Thus, as a short term investor, I should have listened to my instinct and stay long for corn until the market closes on Friday.
In the very end, my equity balance becomes $27576.34, with a net loss of $12,324.50.
Hey,
I’ve got an idea here based on your decisions involving China’s economic slowdown. Don’t you feel that the news that you are working with is slightly outdated in terms of its effect on the market? Even though the article came on on October 18th, it is only reporting on growth up to September, far beyond the time span that affects the market prices. While your logic is sound, I think that it might be lagging behind. An example of this would be the recent news that China is consistently buying large amounts of imports of soybeans, which has been pushing their prices higher and higher.
I think that your logic, albeit strong might be taking too many leaps, which can be dangerous especially in a market that rarely makes precise economic sense. What I mean is that saying weaker growth means less imports means less demand is correct, but there are too many layers where you can go wrong. Maybe look directly at import information. Hopefully that can help you along.
Thanks for the feedback. I`d take more time to read through more updated news. I think that’s primarily the reason I didn’t manage to do well in my investments.. wrong timing!