Hello Everyone:
Again, it's been a long time since I posted here, but I have been busy trading the beans and corn for the past couple of months again. Today I just exited my short SX position and am still in a short Dec Corn position. Things have been going well.
As I've been trading I jotted down a few "rules of thumb" that I've learned along the way and would like to pass them along to the group. I know that some of them seem like common sense, but they're still worth looking at from time to time, just to keep focused.
I'll be in South-Central Wisconsin early next week so I'll write back mid-week with a crop report from that region.
Have a great weekend and good luck in your trades!
Regards,
Mike
LESSONS IN GRAIN TRADING (IN NO PARTICULAR ORDER)
- Trade with a plan. As time goes on, this plan can be modified, but have a weekly goal. When you reach that goal, stick with it unless you are really positive that the market will continue to move in your favor. I've had many cases where I hit my target on Monday and am done trading for the rest of the week. As an example, staring with a portfolio of $3000 can turn into $25,000 in one year with just a $500 weekly goal. In beans and corn , that means 2 contracts moving in your favor for only 5 cents. (not including commission charges)
- Trade with the prevailing market direction. Don't look for market turnaround quick-hits. Although at times you'll be right, this will beat you more often than not. Instead, on a down market, sell on the rallies, don't buy on the dips. The opposite is true of upward markets. Go with, not against, the market momentum. Don't buy dead-cat bounces on an overall down market.
- Always trade using stop loss orders. The best traders know when to get out of a losing trade rather than let pride get in the way. It's OK to have a losing trade.
- Know how much you can afford to lose – set your stop losses accordingly.
- Don't get greedy – any profit is better than a loss.
- Trade with limit orders. A fast market can move against you in a hurry. If you miss your price, let it go and don't chase. There will always be other opportunities.
- Pay careful attention to what moves the market – it is not random motion.
- Preservation of capital is key.
- Don't trade from the hip – use careful, rational thought in every execution.
- Stay out of the market on days or times you just don't feel like trading. Sit back and watch, but don't participate. This avoids making trades based on less than full attention.
- It's OK to be flat for a while – if you're not real sure what you should do, hang back on the sidelines. Remember, a day you are market watching, but not trading is just as important to your trading career as the days when you're in a position.
- Learn from others.
- Adopt a style that works for you. Modify as needed.
- Sometimes losing trades are more valuable in the long run than winning ones. The lessons learned from a bad trade can last a lifetime.
- Keep a log of your thoughts on the markets.
- Create a list just like this one – what works for you? What didn't work for you?
- Be consistent in the size of your trades. For example, always trade 5 contracts at a time.
- Have fun trading – don't turn it into an obsessive chore. If you're trading as a “hobby”, try to get as much enjoyment out of it as possible.. it truly can be a lot of fun!
- Not only should you learn as much as you can about what's going on in today's market, get to know the history of the markets. If you trade grains, the CBOT has a fascinating story behind it that will add to your overall respect and appreciation for the market, thus further enhancing your enjoyment.
- Get to know the market beyond the trading aspects. For grain traders, develop an appreciation for why this market really exists, those guys in the fields who live and die by the seeds they plant, the weather and the market conditions are something to really get an appreciation for. Although I live in a suburban area of Chicago, I actually grow corn and soybeans (the markets I trade) in my garden to try to get myself just a bit closer to the markets I trade. I find that to be not only relaxing, but does greatly enhance my appreciation for things. To hear that the beans are beginning to flower in Indiana, and see my garden doing the same thing definitely adds to my trading experience.
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