I am looking at diversifying into commodities for swing trading, and I would be curious to know if there are any grain traders that would be willing to share their knowledge as to what type of research one would do in order to get accostumed with the factors that influence the grain markets; what makes the actual market participants tick; how one should view and track weather events, etc.
Basically what a new grain trader should learn about the grains futures market. Anyone that is willing to share their knowledge, or provide some guidance as to where one can find said information?, I would greatly appreciate it.
The following user says Thank You to sysot1t for this post:
When it comes to grains you have to follow the USDA (US Dept of Agriculture) reports as for the supply and demand, learn how weather affects the prices and follow the COT (commitment of traders) reports. Also, seasonality in physical commodities is a big factor. When I was learning physical commodities and their fluctuations, I have used the earlier versions of this book: NetPressOrders: Network Press - Subscription Center
One thing I could tell you about physical commodities is this:
1) They have LIMIT UP/DOWN moves where you can get caught on the wrong side with the inability to get out.
2) 2-3% take delivery, which means that at some point after prolonged moves up or down, there could be very strong corrections extending way beyond what technicals point out.
3) You still have to be technically savvy in reading price action as you do with all leveraged trading.
I began trading grains at the Mid-America Commodity Exchange in the 70's and began and finished my career trading Beans at the CBOT. My words of advice are, begin with trading corn, then move "up" to beans, and stay away from wheat. I wouldn't bother with oil or meal ,either.
Feel free to IM me if you would like to discuss this topic in more detail.
The following 8 users say Thank You to tigertrader for this post:
Thank you so much for the information posted so far, I will review it all. I ordered last night a on my kindle David Bennett's "Day Trading Grain Futures" ... interesting read thus far.. it did mentioned corn had the most volume.. I started pulling up the historical data on TS8 to start understanding the market.. again, thanks and please keep posting anything else you can think of that can aid me...
ok, this part freaked me out a bit... so if I took a position, and it moves 2 levels beyond the limit against me due to weather conditions or anything (war, etc) ... I could be stuck and my losses be really, really bad, if the market doesnt unlock for a week or so? I guess I have to run some analysis to understand that better and see what has been the frequency of the lock outs taking place.. that might be more risk than I am willing to tolerate..
I wouldn't be overly concerned.... but it does happen. Corn was limit up 2 days in a row last month
I mostly swing trade CL and ES but mess around with corn and beans whenever I can. They are great to trade intraday.
The following 3 users say Thank You to Snoop for this post:
I have been doing a lot of research lately on how to minimize the risk on long term trades of grain futures, and I came across spreads. I am very familiar with pairs trading in equities, and I am beginning to notice some similarities with spreads... but I am curious as to your guys(and gals) opinions on spreads for trading grains(or any other commodities) futures to minimize risk. Thoughts? Opinions?
I also started looking at doing options on futures, they seem to be another way to control risk... and by risk I mean loose more than what I have decided to risk on a trade...