Hi guys, hi from Andrea Unger! Today, I’d like to talk a bit about the Grains Market and, more in detail, about the futures on Grains.
The futures Grains are very interesting, as they allow you to develop interesting strategies, especially Soybeans. This market is open to many different approaches, including trend-following, counter-trend and bias strategies.
Corn, too, is very interesting, although for different reasons. Corn doesn’t have a large dollar expansion during the day, which means that dollar volatility during the day is not that high. Thus, you can trade it with tighter stop-losses.
Of course, this feature can be very useful to those people who can dedicate only a small capital to trading. In fact, you can easily trade Corn with a stop-loss as low as, let’s say, $400. And if you measure $400 on a $20,000 account, you see it has a small impact in percentage. So, you can actually adapt this to a risk profile that isn’t extremely aggressive.
As said, Soybeans is good for many kinds of approach. On Corn, on the other hand, it’s a little bit harder to find something that works. Normally, you’ll end up with a medium-term trend-following strategy, which is fine. However, keep in mind that you might obviously face prolonged periods of drawdown in these types of strategy. So, if that’s fine with you, perfect, but if you don’t feel comfortable with these kinds of strategy, consider that Corn might not be your first choice.
Wheat is a nice market, but I couldn’t find many edges on it. Let’s say that this market moves in a bad way. I mean, I’m not saying that Wheat is guilty of my failures, but I believe it’s not easy to find good trading systems that work on it, or at least I’m not able to do so. If you are able, perfect; send me the systems and I’ll put them to work!
In general, I think Wheat isn’t the first market you should focus on when you start your adventure in the trading systems development environment, as it doesn’t respond well to the most common movements that you might use.
Soybean Meal and Soybean Oil are two minor markets. I don’t think it’s necessary to focus on them, as there’s already much to do with the three main markets – Soybeans, Corn and Wheat. However, they can be useful if you want to increase diversification.
As you know, diversification is extremely important. I always say it’s the first thing to consider when you want to trade for a living. By the way, this doesn’t mean that you have to look everywhere.
These two markets are also part of the Grains market. They are liquid enough, although not as Soybeans, Corn and Wheat, but it’s not that easy to develop systems on them.
If you’re looking for some trend-following, medium-term systems on Soybeans or Corn, remember that it’s not that easy. You should also forget Wheat and keep it only as a second choice, because it’s not the best market out there to develop systems on.
That’s it. Stay tuned for more markets.
Ciao from Andrea Unger!