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brownsfan019

Trading the Grains - Soy, Corn, Wheat

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One thing that really helped my equity curve become more smooth was using markets where the best opportunities exist. I'll dive into this some other time, but I wanted to bring to focus trading the grains (Soybeans, Corn, Wheat) contracts as weapons in your arsenal when you go to battle each day.

 

Some characteristics of these markets that I've noticed:

  • Open @ 10:30am EST (very convenient to roll to these marekts once other markets have been open for a bit)
  • These contracts move and move quick on the open usually
  • Good liquidity for daytrading
  • Provide a non-correlated market to the indexes or currencies to trade

3 Main markets to choose from in this arena for daytrading purposes:

Personally, I like the movements on the ZS the best.

 

IMPORTANT TO WATCH ON GRAINS: WHEN ROLLOVER IS NEAR

In my haste to get this up I missed an important consideration when trading grains - watching when rollover occurs. When rollover is near, the volume can split over the current and future contract which can cause each contract to slow down b/c volume is split. Just be aware of when rollover is near and watch the overall volume on each contract.

 

Take a peak if you are looking for a non-correlated index market to trade. As always, watch these and practice on sim before placing any real money trades.

 

Just remember that I can't stress enough that these guys will move on the open and move swiftly waiting for no man. I would suggest using a non-time based chart (volume, tick or range) to smooth out the fluctuations a bit.

Edited by brownsfan019

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  brownsfan019 said:
[*]Provide a non-correlated market to trade

.

 

 

I agree they are great markets.

 

What do you mean by non correlated?

The three markets are correlated to each other, please explain.

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  Mustang- said:
I agree they are great markets.

 

What do you mean by non correlated?

The three markets are correlated to each other, please explain.

 

Provide a non-correlated market to the indexes or currencies to trade

 

Post edited, thanks for the question. I should have clarified better.

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These are relatively cheap contracts, in comparision to Stock index futures-min tick is $12.50. If the concern is daytrading margins it really depends on your broker if they will provide daytrading margin or not.

 

Corn is the cheapest contract. price 340's

Wheat 2nd cheapest contract. price in 450's

Soybean most expensive of the three contracts.. price in the 920's

 

You can get more inforamtion on them at the CME.com, I think they are listed under Agricultural commodities, its been a while since I have visited CME/cbot so im not sure--

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  Dinerotrader said:
I am not too familiar with these futures. What is the going rate right now for one contract and what is their tick in $?.

 

My original post has direct links to the CME. I went ahead and did the work for you.

;)

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Brownsfan,

I was looking at the Corn futures on a 30 tick chart. Is that what you would recommend. I included the early morning move on 9-30 below.

 

Do you have any other ideas for trading these commodities profitably in the early part of the session?

 

What time frame do you usually restrict your trading on these like you do with the ES?

 

attachment.php?attachmentid=13933&stc=1&d=1254553795

5aa70f32daa96_corn9-30.thumb.JPG.a742ce8d545b91d0c99408e754f8d864.JPG

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Dinero - the chart setting really is up to you and your comfort level. I would suggest opening up at least 3 different chart settings and see what you like the best:

1) Volume Chart - something like 50-250

2) Range Chart - something like 4-15

3) Tick Chart - something like 30-100

The higher the number, the slower the chart will print new candles. From there, it's a comfort level. I personally like range charts on the ZS.

 

Watch them in real-time and see what you like. Just looking at static charts is misleading b/c you might not be noticing that there are bursts of candles printed and then not much, esp. on the open.

 

Lately I've seen the ZS pretty much head in 1 direction once it's decided what that direction is (and usually doesn't take too long). If you can get on the right side, can make some quick money as this bugger doesn't wait around.

 

Good luck and let me know how it goes and what you are seeing.

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I new to this forum, but not the "Grains".

Here is some more food for thought on the Beans.

Look at Spread Trading "Old Crop/ New Crop".

I am setting up for the next run on the SN10/ SX10 once I see the seasonal lows kick in on the Seasonal Charts.

Just for an example, last years Old / New crop in beans was pretty profitable.

Late Dec 08 the Spread was near the ZERO line. By first week in July it was up in the 200's.

That is $50 per point, per contract. Nice run. Hope to do it again.

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Some initial observations on ZS from an equity index trader - not in any particular order:

 

1) The overnight (I'm in the us) trading seems to be very active. I assume Asian traders are actively trading ZS.

 

2) As a globex trader I assumed opening price gaps were a thing of the past. Not so with ZS. For some reason the CME designed this contract with a 2 hour and 15 minute time gap before the open outcry session.

 

3) Trying to figure out which contact month to trade (the high volume contract), I did some volume analysis on all the contract months going back to 1/1/09. The current Nov contract has/had the daily high volume going all the way back to the first day my data vendor has data for the Nov contract - 6/29/2009. During this time, the Sept nor the Aug contacts ever exceeded the Nov's volume. Is this typical or was there something special about the Nov contract this year?

 

thanks,

mr. bojangles

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  Mr. Bojangles said:
Some initial observations on ZS from an equity index trader - not in any particular order:

 

1) The overnight (I'm in the us) trading seems to be very active. I assume Asian traders are actively trading ZS.

 

2) As a globex trader I assumed opening price gaps were a thing of the past. Not so with ZS. For some reason the CME designed this contract with a 2 hour and 15 minute time gap before the open outcry session.

 

3) Trying to figure out which contact month to trade (the high volume contract), I did some volume analysis on all the contract months going back to 1/1/09. The current Nov contract has/had the daily high volume going all the way back to the first day my data vendor has data for the Nov contract - 6/29/2009. During this time, the Sept nor the Aug contacts ever exceeded the Nov's volume. Is this typical or was there something special about the Nov contract this year?

 

thanks,

mr. bojangles

 

1) I suppose some overseas guys are trading afterhours. I only trade during pit hours.

2) And IMO that's why this thing will move on the open. There's built up interest while it's closed and that open gets it going quickly. I much prefer that over the 24 hours of the other globex products. I kinda wish everything was just open at 930am and closed at 415pm.

3) No idea.

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I'm assuming there are some ZS specific economic reports to be aware of. Could you point us towards a good source to find what and when they are - a ZS economic calendar. As a minimum, to know when to step aside.

 

thanks,

mr. bojangles

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  Mr. Bojangles said:
I'm assuming there are some ZS specific economic reports to be aware of. Could you point us towards a good source to find what and when they are - a ZS economic calendar. As a minimum, to know when to step aside.

 

thanks,

mr. bojangles

 

I pretty much focus on trading the first 30 mins or so of the ZS being open, so I'm not looking at any grain reports and what not. I'm in, out and wait till the next day to do it again.

 

With that said, if you swing trade this and/or invest in this, then I would do some serious homework on these markets before putting any real money at risk.

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I updated the original post but wanted to give an example here showing how the volume can split when rollover is near.

 

When rollover is near on the grains and the volume is split, you should anticipate smaller moves b/c there is literally some people trading the old and some the new and there isn't as much power behind the pushes.

 

Today's example:

 

attachment.php?attachmentid=14700&stc=1&d=1256828318

 

That is taken from my quote window on OEC trader and the last column is total volume for the day. As you can see, the volume is basically 50/50 at this point. As a direct result, we are seeing this type of price movement:

 

attachment.php?attachmentid=14701&stc=1&d=1256828495

 

 

So plan accordingly when you see volume split. Do not expect huge, quick movements as you see when there is just 1 contract being traded.

tl1.png.dd7bf7b04033241c26d68d223522547a.png

tl2.png.e5dc071320a98c764d1888af64456fe8.png

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  Dinerotrader said:
That explains a lot. I was watching the ZS yesterday and today wondering why the large moves weren't happening. I really appreciate the post about this.

 

Just glad I thought of it now. But it was apparent today b/c I was sitting there going - come on, what the hell is going on here? I just told these guys on TL that this thing moves and then it's at a standstill. Well, rollover is the one time you may see the movements not be as much. There was still money to be made on the ZS the last 2 days, but the moves are smaller and slower.

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  brownsfan019 said:
Just glad I thought of it now. But it was apparent today b/c I was sitting there going - come on, what the hell is going on here? I just told these guys on TL that this thing moves and then it's at a standstill. Well, rollover is the one time you may see the movements not be as much. There was still money to be made on the ZS the last 2 days, but the moves are smaller and slower.

 

There is always money to be made.... its a question of whether I can make it. If you would, leave some for me to make tomorrow instead of selfishly taking it all. :)

 

I am so used to stocks and still relatively unfamiliar with the rollover process. How long should it affect the volume? When do you normally switch to the new contract?

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  Dinerotrader said:
There is always money to be made.... its a question of whether I can make it. If you would, leave some for me to make tomorrow instead of selfishly taking it all. :)

 

I am so used to stocks and still relatively unfamiliar with the rollover process. How long should it affect the volume? When do you normally switch to the new contract?

 

The rollover happens fairly quickly - a few days. And all futures contracts have rollover, but they vary based on what market is being traded.

 

I move to the new contract as soon as the volume there is the same or greater than the old one. I do that simply to make it easy and should I somehow forget to close a trade or something, I'm in a contract that can be closed easily b/c as soon as the volume dies on the old one, it dies big time.

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