Monthly Archives: November 2012

http://www.agweb.com/crops/soybeans.aspx

–> Gives us useful comments on crops, harvest news and updates, news guide on  grain commodities, cotton, hay and seeds.

http://www.forexpros.com/commodities/us-soybeans-technical

–> Data and indicators on technical analysis

http://www.farms.com/Commentaries/video-what-could-changes-to-the-canada-grain-act-mean-to-my-farm-57315.aspx

–> Insights: Canadian Grain Act and effects in the grain industry

How does it affect farmers? What role does it play in grain trade? Supply chain risk management for farmers.

In the real world, technical analysis is definitely useful especially looking at short term trends using geometric methods such as descending vs. ascending triangles, head and shoulders etc.

I also find candle light charts helpful in understanding trade volume difference in open and close along with high and low in price, which reflect forces of supply and demand in the futures market.

The annotated example in the chart shows a stock that has a gap opened up. Prior to the open, the buy orders quantity is above that of sell orders, and the price increased to attract more sellers. Initially, there was a rapidly increasing demand. And thus, the intra-day low reflects the availability of supply (sellers). The close represents final price agreed by the buyers and sellers. It is below the high and closer to the low. This illustrates that despite of having a strong demand from buyers during the day, it is ultimately supply that prevailed and put downward pressure of the price. Here, we observe the battle between supply and demand. So basically, higher prices reflect a surge in demand, and lower prices reflect an increase in supply.

If I learned technical analysis earlier on, it would have been useful in predicting futures price based on the pattern or trend analysis.

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On Thursday, Nov 22nd, I have just gone back into my Tradesim account. It says no trading when I tried to browse for contract orders. I wanted to offset the long position I have for soybeans and get a new short contract. I’m losing $5037 in soybeans. Not sure what has happened here.

From market trend, it looks like I will continue losing on my equity balance. It was all because of the glitches on tradesim. I thought I have exited to market earlier two weeks again for my four long contracts on January soybeans (S3F) and March corn (C3Z). However, this isn’t the case.

If I manage to enter the market to change my trading strategy, I will change my position to short for soybeans, and possibly getting two short contracts.

Turns out that soybeans is on the rise based on US’s turkey day. However, for some strange reason, I have incurred $4,512 worth of losses on tradesim.. with a lower net equity balance of $26,427.64. What a pain?!! I guess, at the end of trading game, I still haven’t managed to recoup all my losses.

 Lesson learned: when in doubt, exit the market sooner the better!

Now that I have learned my lesson of not taking opposition future positions, I changed from long on corn to short on corn, and short on soybeans.

Logically speaking, my approach is correct, since soybean and corn prices have linkages within the feedlot and crusher market. Surplus in corn market would also drive down prices of soybeans in the market. If feedlots demand for corn has been saturated.. so as soybeans. As corn price decreases, the market price linkage, in effect, offset the price drop in corn by transmitting the effect of lower prices to soybeans.

However, I have not taken into account that since corn contract is in March and soybeans contract is in January.. the time difference implies that these two crops could face different shocks.

In effect, corn and soybeans prices are always consistently moving in tandem. Thus, this explains the reason why I incurred a $112.50*2 = $225 in corn, when I have a gain of $562 in my soybean contract.

Net gain: $337; equity balance: $25,420.64

Holding 15 – short on C3H                  mark to market

price in:       740.25

today’s price:  742.50

committed:      $1917.50

gain/loss:      $-112.50

Holding 16 – short on C3H                  mark to market

price in:       740.25

today’s price:  742.50

committed:      $1917.50

gain/loss:      $-112.50

Holding 20 – short on S3F                  mark to market

price in:       1538.00

today’s price:  1526.75

committed:      $3800.00

gain/loss:      $562.50

Based on the price trend analysis, March corn contract is going to decline in the next two days until Tuesday. I will change to a long position thereafter before I start losing more money in my C3H contract.

For soybeans in Jan, there is pattern of a decline in four to five days range and a surge in three days. Prior to the trading day on Monday, I think I should change my position on soybeans to long.. as Monday would be the day when soy prices reaches another turning point (change in direction from decreasing to increasing from Tuesday to Thursday).

CH3 Futures Price Trend

S3H Futures Price Trend

“Corn Slip on exports” DowJones newswire

http://www.agriculture.com/markets/analysis/corn/cn-futures-slip-on-sluggish-expts_9-ar27280

“Future slides as exports remain weak” Wall Street Journal

http://online.wsj.com/article/DN-CO-20121102-009147.html

“Corn and soy pressured by a strong dollar” DROVERS, American’s beef business source cattle network.

http://www.cattlenetwork.com/cattle-news/Corn-and-soy-markets-Pressured-by-Strong-Dollar–176978811.html?ref=811