Commodity Trading Advisor says: Stay on top of your corn commodity futures and options

Commodity Trading Advisor is long March '06 corn. This should not be a surprise to those reading or subscribed to this blog. As Commodity Trading Advisor mentioned in the previous post, since the market is now moving in our favor, we want to periodically move up our stop-limit order so we can lock in our profits. The question is: when does Commodity Trading Advisor move the stop-limit order up? This is as much an eye-ball thing as a dollars and cents thing. If you look at a chart of March '06 corn futures, you'll note that as of today, corn futures closed at 212 3/4 (up 2 3/4 over yesterday). Since we are long from 210 1/2, and each point (or penny change) in corn is $50.00, then if we liquidated our position today, we would make a little over $100.00. Commodity Trading Advisor does not want to lose that money if the market drops, but at the same time we don't want to accidentally exit the market just because of normal market fluctuations (futures prices do go up and down as a natural matter of course, don't they?).So how safe is safe? There are a couple support levels on the chart that Commodity Trading Advisor notes are significant. The obvious first one is the historic low corn made which triggered out interest in this market. The second point is where the market made a nice formation that signaled to Commodity Trading Advisor a reversal in market trend at 204 1/2. We initially set our stop-limit at the historic low. Now, we COULD move our stop-loss up to that second support point on the chart. If the market drops, and shoots right past 204 1/2, our stop-limit order would be triggered and we would automatically exit the market. This would cut our losses to the difference between where Commodity Trading Advisor entered the market (210.5) and this new stop-loss level of 204.5 (210.5 - 204.5 = 6 x $50 = $300).But what if the market only dips below 204.5 temporarily on its way to new highs? Well, if we move our stop-limit now, then Commodity Trading Advisor would be sitting on the sidelines while all the other people long March '06 corn count their profits. The answer to this quandary is to simply play it as safe as one needs to. Commodity Trading Advisor had a plan when we entered the market, and that was to risk the margin requirements of the Corn Futures market (approx. $500.00) which means we will not be moving our stop-limit order just yet. When prices move up a little more where we can effectively eliminate ALL of our risk by moving it to our entry position of 210.5, then we would have a prudent reason to do so. There are markets where margin requirements are so high we would consider edging up our stop-limit sooner, but Corn Futures have a pretty low margin requirement that allows Commodity Trading Advisor more leeway. This is one of the reasons we like to trade corn futures!Stay tuned to Commodity Trading Advisor for all the latest updates on this price move!

posted by Superior at 4:26 PM

0 Comments:

Post a Comment

<< Home

Subscribe to Commodity Trading Advisor

Or, Right-Click on this XML Logo to copy the RSS Feed URL:

Or, click on any of the following:

About Me

Name: Superior

View my complete profile

Previous Posts

标签： commodity trading