analysis >> Trading on Thin IceTrading on Thin Ice

I didn’t do much in the way of analysis this weekend, due to family engagements and just generally taking a break from everything. However, hanging over any thoughts I had, about entering into a new position, was the fact that I still don’t think I have recovered enough to open a new position. I have learned all too well that you need to be able to withstand short-term reversals and I don’t want to lose any more of my capital by needlessly entering a position and then getting stopped out a day or two later. The size of my account and the levels of leverage at which I would be trading a lot of assets also precludes me from a number of possibilities.

Nagging away at the back of my mind also is a fear of losing money, of a position going against me. Having previously been reckless I now think I’m feeling overcautious. I will have to work through this psychological barrier so that when I do have enough money in my account, I will be able to pull the trigger and enter into another market.

Only this morning did I finally look at a few different commodities. There were a few possibilities and I almost entered long into gold, but held off for the reasons previously stated. As far as this week goes, soybeans are obviously still worth staying in, so there was no need to make much of a decision on that. I did move my stop loss up some more, to protect myself from a price shock. All in all, nothing major.

Corn seems to be grabbing the bigger headlines today, but for me soybeans continue to play up a storm. Now into it’s tenth successive positive close, soybeans continued to make fresh three year highs, reaching 996’4 early in the session. The USDA‘s weekly exports figure came in comfortably at the higher end of expectations at 513,600 metric tons. It was also reported over night that China will be lowering import duties to help combat hyper-inflation. This news was seen as more important for corn with China obviously needing more for food consumption than they are producing this year, but it was also seen as positive with China being the largest importer of soybeans. Both of these no doubt were the major bullish factors on today’s movements in soybeans.With the November 2007 contract within a whisker of $10 and the following three contracts already above the $10 mark, can this week end by breaking through this resistance point? I doubt it. It may reach the $10 during the session but with the usual closing of positions and weekend hedging, I’m expecting it to do no more than consolidate around or lower than today’s closing price.

Today however marks an important psychological milestone for me as my account finally reaches back over €750. This signifies the last of the lump sums that I deposited into my account several weeks ago. I was hugely over stretched at the time and followed it with more foolish behaviour that eventually with one mistake lost me a huge chunk of my capital. Since then, with my capital so low I was forced to cut right back on my positions and as a consequence missed out on the major movement in wheat recently. That lesson has been hard won, but I believe well learned at this stage. My open position profit also made it over €500, another nice number to reach. Of course, I realise that these are not concrete figures nor that they in fact mean much, but since so much of trading is psychological, it remains important to me. It also means that I have a new goal in mind and as such is a step forward.

I’ll leave you with an excerpt from a short article by Nico Isaac, introducing two publications (Monthly Futures Junctures and Daily Futures Junctures) that provide analysis on commodity markets.

Sorting Soybeans: The media reports are more “mixed” than a bag of beans: “US soybean harvest forecast to be smaller than last years.” — VERSUS — “Soybean acres could be on increase next year.” And, “Soybean harvest faces another threat: freeze damage.” — VERSUS — “There are no specific harvest concerns at this time.”

The September 18 Daily Futures Junctures has ONE clear message: “I believe this is a market to watch this week.”

Open Positions

Asset	Contract	Position	Change
Soybeans	November 2007	Long	+18.38

Account Details

Account Balance:	€271.48
Open Position P/L:	€503.52
Account Position:	€775.00
Overall P/L:	-€1275.00

Feeling Cautious

Soybeans Ease the Pain

Open Positions

Account Details