Sweating

My position trades are absolutely going insane. While I was prepared to go through 'some' draw downs, but I didn't expect them to happen this fast and this furious.

Two lumber puts are expiring today. Lumber closed around 219 yesterday, so if it doesn't close above 220, I'll get assigned on two contracts. I'm hoping that the market closes above 220, so I have a bit more room on margin to carry my spread. I want you to know that this Lumber is doing exactly what I expected. But the problem is....

This spread trading is just nuts. This is not 100% same tpye of trading as the Lumber trade, because the spread can go to infinite even if it never happened before. As beans move higher, my loss gets bigger because soymeal doesn't move as much as beans. I'm really attempted to exit soymeal and sell another bean at the current level (adding onto a loser??). I was going to do that last week, but I just haven't seen any weakness at all! Ideally, if I see a big engulfing pattern or shooting star type candle, that tells me we're at least ready for a pull-back, which will give me enough time to take profits of $1-3K, which is significantly reduced from the projected target of $7K or so.

I really need to manage this position. I might need to deposit more. Some may say just exit the position, but it was a great level to enter the spread at $27500 and it's even better now at $37000! Maybe my version of black Monday is coming, but just not yet.

Long 1 S @ 1480.5

Results:
0 or $0 (before commissions)

I just can't believe what grains are doing. Wheat's range is $11 /b to $13, which is just crazy. I've been thinking about Wheat-Beans spread for a while, but even before I take any action (when Wheat was limit up for a while), Wheat came down really hard. I gotta call some farmers to see what they are thinking about this action.

Lately, I've been fighting against the trend, but this seems like a crazy topping action. I'll update about this later on.

Inflation

While stock indexes are still not doing anything, I think markets are nuts! Most of people think we'll see the Jan low again in stocks, so basically they are sitting on their hands until something happens. From what I've learned, when things are too obvious, markets tend to do the exact opposite. Take a look at bonds. Ever since it made 122 or so, it came down significantly now trading around 116. If bonds head lower, economy picks up and stocks rise, which is exactly what Bernanke wanted.

Now the problem is inflation. I trade grains keeping my eyes on other commodities such as metals, energies and softs. They are all screaming high. CPI and PPI numbers are not good at all. We have an FOMC coming in mid March. The current markets are implying another rate cut, but my guess is that this will be the first time that the FED will not cut the rate since last year. Rather, they will hold the rate to see what happens. If this happens, stocks will not like it, but probably not panic either but commodities will stabilize.

I will enter short trades in the first week of March to take advantage of this.

Short 1 S @1410

Result:
+1.25 or $62.50 (before commissions)

Still no clear direction

I'm still not clear on markets. Some are just too high to get in and some look as if they are going to die, but keep rallying. Most of all, I'm holding two losing long term trades, so I rather not do anything because I really have to manage my position trades. I might move some of my day trading account funds to swing accounts.

Soybeans and soy meal spread:
It's against me about -$6K (from spread of $27000). I was going to add another position at -$5 or ($32000), but I decided to wait due to roll over this Friday. I might as well establish a new position in May contracts.

Lumber:
Lumber went as high as 237 last week, but now it's around 221. I have 240 and 220 puts. What I'm hoping for is to have the 220 puts expire worthless ($770 profit), roll over the 240 and look into sell a May 210-ish put. Lumber's margin is about $1K, which is small, but it'll help me carry the spread trade if it expires worthless.

Rewards are high on position trades (not swing), but also it takes tad long. I've been doing okay on day-trading. So far this month about +$1K besides my full time job, but I feel that I'm over-trading, so if I move money to swing accounts, it'll prevent me from day-trading any more, which is what I want, at least for Feb.

Short 2 YM ay 12286

Results:
-9 or -$90 (before commissions)

I'm just not good at it today. I hope keeping my losses small eventually pays off. Not a good way to head into the weekend.

Short 2 S at 1362.75

Results:
+3 and +1.25 or +$212.50 (before commissions)

If Corn broke down together, beans could have fallen apart, but corns are just not paricipating. The last stopout could have been avoided. :(

The first target is usually an insurance for me and the real money maker is the 2nd target, which is a runner, but I haven't had a runner for a long time. I need a big runner one or twice a month until then my job is to protect my capital.

Short 2 S at 1364.50

Results:
-4.50 or -$450

I was trying out-smart the market and the result is usually... a loss.

Grains fundamental outlook

I talked to a few farmers the other night about recent grain markets. Note that I am just a speculator, so please read the disclaimer before you do anything.

While they are expecting a really good year from grains making all time high, they soon have to make a critical decision about planting by end of this month or so. (March crop report will be really huge because it'll tell us how much shortage/excessity we'll having for this year's crop.)

In short, many people are planning to put beans this year ($14 /b is just nuts), which will lead to too much of beans and a possible shortage in corns. People who put corns are a bit nervous because corns are not appreciating as good as beans or wheats, so they are changing to beans or even wheats. (Farmers whom I talk to, don't usually do wheat in that area, but they are considering to change.) They said corns must hold its price or they'll lose money. Of course, that doesn't mean corn won't go lower, but if that's the case they will highly likely change to beans. I guess after all the bio-desel thing, people put too much corns.

One thing you need to know is you can do beans back to back or a few years in a row (This is how I understood, but double check it). It has something to do with soil being used up. Hope you get the idea from here.

Where am I going here? I'm not saying it'll, but it seems that corn will appreciate quite a bit in the year of 2008-09. Farmers are very smart. They've using futures to lock in their profits 2-3 years ahead and the quantities they are trading is a few thounds contracts at a time easy scaling in! One of the biggest farmer said, while others put beans, he'll put corns. This guy has a specific level to buy futures on the white board in his home office. By the time, there are too much beans from other farmers, he'll be one of few suppliers who sell corns. This has been doing this for years!

This is also a good news to me because I have a spread trading that's going through $5K drawdown and as I stated earlier I'll scale in every $5K. The spread will get smaller as beans price drop, so I like that idea, but I need to make sure I'm not over-leveraged. I may even do beans - corn spread.

I've been trading grains since Q4 of 2008, so I'm curious about how much volatile markets are going to be during planting / harvesting seasons.

Long 2 S at 1361.28

Results:
+2 and +1.25 or $162.50 (before commissions)

Heading higher now, but it's okay.

Short 2 Wheat at 986.50

Results:
+3.50 and -1.25 or $112.50 (before commissions)

I put a sell stop order at 988.50 and I got filled at 986.50!!! On the 2nd position, I thought I moved my stop to b/e +1 (I didn't know I got filled at 986.50), but it was -1.25 and it all happened so quickly.

Overtrading?

When I used to 'always' lose money, the frequency of trading was very high. I was just losing money from commissions only (on top of many stupid trades). In the past few days, I felt as if I'm back in days doing the similar thing. Traders' 3 deadly sins are

1. Under-capitalized

2. Over-trading

3. Lack of discipline

It's just amazing that at on point I feel like I'm a pro, but next day I'm not different from when I first started trading. What I should do is probably video-record what I am doing. It will brutally record everything I do (moving stops, impulse trades, taking early profits etc...)

Markets don't seem much clear to me especially in indexes. It looks like it'll test its low, but moves don't seem strong. There's an old saying, 'Never short the choppy market'. Not much daytrading setups on indexes either, so I've only trading grains. One thing that stands out now is Oil.

Short 1 W at 1010.5

Results:
+0.75 or $37.50 (before commissions)

Update:
Wheat is just not working well with me. I know I am very aggressive on my trail stop (I like to move stops to b/e asap), but I got stopped out on a spike hike at break even. Now it's trading at 990. 20pts on grains is $1000! I called Wheat's top yesterday, but still not able to trade properly... :(

Wheat is a contract where you get stopped out 5 times,but when it works out 1 time, you make a killer. I need to stop trading today before doing anything stupid.

Short 2 S at 1321

Results:
+5.25 and +2.50 or +387.5 (before commissions)

I thought we were gonna blow 1313 level, but my 2nd position got stopped out on a bounce. I don't like this kind of quick bounce.

Short 2 S at 1324.25

Results:
-3.75 or -$375 (before commissions)

I'm going through bad drawdowns. I will keep trading my plan to limit my risk. I've had a good string of wins since November. I guess it's time for a string of losses. It's not fun, but what can I say.

^@$%%$#!%@ Wheat

After I got stopped out 'THREE' times in a row for the same setup, Wheat went my way at least 15 pts (or $600). This is a typical example of trading. When I get in, I get stopped out. When I don't get in, it goes my way. What I did right though was to take my stops where I'm supposed to take. All I needed was one trade to offset all the losses, but I suppose I missed it. Some may argue I'm using a too tight of stop, while it's a valid point especially considering Wheat's volatility lately, my setup doesn't need a tight stop.

Losses are small compared to what I've been doing this month. I was up about $1500 so far, so even after these 3 losess, I should be up $1100. I would take extra $1000 a month any time. In fact $1000 a month in trading was my goal last year.

Short 1 W at 1068.50

Results:
-2 or -$100

Well, I violated my previous statement and the result is a loss... Markets don't have a mercy on who's not disciplined. I felt like somehow I'm not synced with markets today.

Short 1 W at 1069

Results:
-2.25 or -$125.50

I thought Wheat's gonna tank, but it didn't, so I gave a small stop loss. Two stops in a row, I'm not trading any more for the rest of the day.

Short 1 W at 1070

Results:
-2.25 or -$125.50

Wheat limit up again

Wow. CME Group (or CBOT) decided to reset Wheat's limit move from 30 cents to 60 cents starting today. Guess what! In overnight session, Wheat is limit up 60 cents. It's 5 days in a row? Wheat is absolutely a panic mode now, which in fact is a very good candidate of an inverted V. I'll start looking for some day trading on short side tomorrow. If this move has been panic, a down move will be really panic!

I also start looking at some Soybeans and Wheat spread. I'll patiently wait.

Short 2 S at 1346.50

Results:
+2 and +8 or $500 (before commissions)

Short 2 S at 1351.75

Results:
+2 and -1.5 or $25 (before commissions)

I manged this trade wrong. Usually after T1, I move stop to b/e + 1tick, and I thought I did. $75 for another lesson from the market. :(

Short 2 S at 1338.75

Results:
+2 and +8 or $500 (before commissions)

I was not sure about this setup because Wheat was limit-up and only about 30 mins left, in which people who stuck shorting Wheat might buy Soybeans to reduce their risk. However, I did like the pattern that Soybeans came off its high (almost limit up), so I took the trade and it turned out well.

Still sitting on my hands

There is usually at least one or two markets that are standing out, but lately I've not seen anything special, so I'm standing aside. I used to get bored and did many implulse trades that only resulted in tons of losers. I was in fact suprised at myself becoming more profitable as my trading frequency goes down. It takes so long to build a good account, but takes only one bad trade to wipe everything out!

By the way, Lumber finally shows a bit of strength, but still too early to say. I think that demands for Lumber is not as good as when housing markets wer hot, so I have to see. On the other hand, the spread trade is just not doing well. I look into adding around $32000 level ($5K from the initial entry).

Monthly Total - Jan 2008

Day trading account: +$576.86
Swing trading account: +$4.68
------------------------------
Total: +$581.54

I did only handful day-trades this month. Luckily all turned out to be winners. I will eventually have a loser, but I will keep it as small as possible (less than $200 for YM and $400 for grains).

Not much on swing trades. I entered three position trades in two markets. As I will roll-over in Feb, I'll probably have to report losses even if they are still considered open positions. My drawdown is about $4500 (yikes), but I will show you how they will be profitable in 6-month to 3-year term. Thoses are, again, long term trades, so I don't worry much.

2008 Monthly Profit / Loss

2008 Monthly total breakdown

Month/ Liquidated Value:

Jan: -4597.52 
Feb: -7755.11
Mar: +4715.89
Apr: +3850.93
May: -2320.69
Jun: -4094.61
Jul: +14323.24
Aug: +8483.69
Sept: -8565.88
Oct: -5702.21
Nov: -1981.79
Dec: -2013.00

Total liquidated value: -7498.56

Month / Closed value:

Jan: 1525.98

Feb: -6622.79

Mar: -2539.93

Apr: 4109.93

May: -2787.69

Jun: -4093.61

July: 4399.24

Aug: 19098.09

Sep: 415.08

Oct: -1335.21

Nov: -12277.79

Dec: 4004.38

Total Closed: +3967.17

---------------------

Long 2 S at 1292.75

Results:
+2 and +5.5 or $375 (before commissions)

Took a bit of heat, but I did trade my plan. In fact, I let my 2nd target run a bit more.