Month: October 2015

It was a winning week! I ended up with gains on my cotton, cocoa and coffee contracts. Even though I did not make a big profit due to the small contract size, I did learned lessons from my loss experience of shorting orange juice that staying in the market for too long in the hope of the commodity futures going even higher would consistently cause me losing money. It was better to close out the position sooner when a reasonable profit had already been made and opened another new position to lock the existing margins.

My holding decision onto the losing trade turned out to be right. The orange juice price dropped and my loss became smaller. I would put this position aside for a longer period since I only shorted 2 contracts, and as far as I was concerned, the cold weather and Florida frost would prolong orange juice rally. My best strategy at this time is to wait and cover this unsuccessful trade at a relatively lower price level.

Moreover, I plan to do some day trading in the coming week on two of the most fluctuated commodities, coffee and cocoa as I am seeking to make profits to make up my losing position on orange juice. In particular, I will leverage large contract quantities on these two commodities to take advantage of the small price movements. The latest coffee future price decline was attributed to ideas of, some rain relief for Brazil’s coffee and I will pay a close eye on the quotes on Bartchart.com and respond quickly to the daily price movements.

This week I was still experiencing a big loss from shorting the orange juice futures. Although the futures headed lower today, I was expecting that it would remain with range of this three-year high for a while, for which harvesting for oranges has finished and a series of winter storms has brought hard freezes and frosts to one of major producers (Florida). Even though my potential loss on this short sale could go even higher, holding and covering it when prices fluctuating to a relatively lower point would be my best strategy at this point.

Moreover, wheat comes to the harvest season and it is said that this year’s production would break the record by an even bigger margin. I shorted one contract with the expectation that the higher global wheat stock would lead to a fall in future prices. Same for the cotton futures, the prices were sitting at a relatively high level recently and showing a sign of declining from NASDAQ’s 3-month price quotes chart. It eased back from nine-month highs with concerns over the dent to China’s imports. I speculated that the new cotton future prices would challenge to exceed the present high levels and thus I shorted the contract. As to cocoa, I was holding my long position for several days and it was finally showing a gradual price climbing. According to my research, the production shortfall in Ghana and the fact that the ongoing EI Nino weather phenomenon appears to be strengthening the cacao future prices. I should not ignore the volatility of pricing and fragility of supply in the cocoa market. I would try to capture a price high and close my position shortly at a higher yield.

After the lesson learned from the first week, this time I took a closer look at the 7 days pricing on NASDAQ rather than the general 3-month pricing trend. Even though the time span was shorter and fluctuations might be large, I found it is more precise to predict future prices this way, helpful for capturing the quick profit margins while doing more trades at the same time. I closed my long position on oat and ended up with a $525 loss. I was regretting my decision on this that I should wait for a few more days even though there was a consistent drop in oats price. Since the drops were not very dramatic and the contract was expired in Dec, I should close my position whenever it got a positive gain. I was so easy to lose my patient and gut reactions deviated me from my primary chosen strategy. Now I learned that in trading games, it is important not to allow self to be ruled by emotion and the persistence is key.

I covered my short position on wheat as well and ended up with a $225 gain. Besides, I went long on one coffee contract and went short on 2 orange juice contracts. My logic behind is that considering the coffee price is consistently keeping rising lately, I am expecting the trend will continue. However, since the coffee price is normally volatile and I already missed the lowest point, I am taking the conservative approach by taking on only one contract position. But coffee is undoubtedly one of the commodities that I will always keep an eye on that it always fluctuates sharply and thus gives high profit margin. As for the orange juice, my intention is to try out a different commodity that people don’t often buy. This time I checked out the technical views on Barchart.com and went with what most professional traders did. I went short on 2 orange juice contracts and it seemed that my position was losing during these days. Nevertheless, I will keep the position open and see how it goes, as I want to learn the thinking behind the majority of professionals’ opinions. On the other hand, I realized that this trail and error approach may cause my to lose profits, but it is worth to learn and understand the rules behind first.

In the first week of futures trading, I bought 2 contracts of oat and shorted 2 contracts of wheat. My initial purchases are based on the latest quotes & chart for commodity futures on Nasdaq.com. Notably, oat prices have consistently dropped from its regional peak in July almost to bottom of the year. This led me to go long for oat with the expectation that the prices would rise by the time contracts expire in Dec. I may hold this position open for a longer period, as I believe the potential rebounding is strong and it needs time for oat prices to bounce back up to a relatively high level. As regard to wheat, it appears that the price trend follows seasonal cycles and is now sitting at a recent high point. Going short and repurchasing in the future at a lower price will generate a profit. My inference was confirmed by a 1.40% gain in wheat as of Oct 2^nd. Overall, I was playing the strategy to trade in pairs, going short on a weak commodity and long on a strong one. By making these trades simultaneously, I could increase my odds of achieving profits. However, grains hold a special spot in the future market and I seem to have overlooked the fact of weather and inventory could dampen the effect and make the market more sensitive to anything that can affect yield.