Noel
Campbell

A student who has taken the time to study when ABC Trading works best will have no doubt that a strong trend is the key. We have seen over recent months how incredible the run up in Soybeans has been. Along with that, it has yielded some strong returns for the ABC Trader. This week I will highlight a recent ABC Trade on the Soybeans. Before I do though let’s take some time to get more familiar with the Soybeans market.

Many of those more comfortable with stocks than futures, might find the Soybeans market or other commodities, unfamiliar territory. When it comes to gearing up to find out more about a futures contract that you are considering trading, there are a few basic questions you need answered.

  1. On what exchange is the contract traded?
  2. What is the minimum price movement for the contract (one tick)?
  3. What is a one tick worth?
  4. What contract months are traded?
  5. What are the margin requirements?

Once you have gone through the process of finding these answers for a couple of contracts, it becomes straightforward. The best place to find out these facts is on the Internet or via your Software. By navigating your way through the ‘Symbol Tree’ you should find it relatively simple to find the market you are preparing to study. For example Soybeans are found under ‘Futures’ – ‘Grains’ – ‘Soybeans.cbt’. Once you have a Soybeans chart open you can then click on ‘Action’ and ‘View Information’ to reveal more about the contract. By clicking on ‘Futures Specifications’ further information is given.



Here we can see that the Soybeans contact is traded at the CBOT (Chicago Board of Trade). The minimum price movement is 0.25 and that has a value of US$12.50. The contract months are January, March, May, July, August, September and November. The only piece of information missing from our list of questions is the margin requirements. Your broker will be able to readily fill you in on this detail.

Some futures contracts like Stock Indices, Currencies etc require you to keep a continuous charts. That is rolling from one contract to the next, as volume switches over. Some commodities such as Soybeans have single contracts charts that you can virtually trade all year round. Some traders may just keep a chart of the July Soybeans contract, rolling over contracts on the chart only once a year. The July contract can be found using symbol code S-Gann.N.

Chart 1

click chart for more detail

Chart 1 is the current daily bar chart for the July Soybeans with a Swing Overlay. The ABC trade for March has been labelled. Entry for this trade was on March 9 at 917.25, well within 25%. Being a larger than average reference range, a safe exit at 75% can be an excellent strategy. This sees the trade closed out at 1020.5, securing a profit of 103.25. With a minimum movement being 0.25, a profit of 103.25 is equal to 413 ticks (points). At US$12.50 per point, that’s a profit of US$5,162 per contract.

In Australia, we are limited for liquid futures contracts traded through the Sydney Futures Exchange and you need to look abroad for opportunities in foreign contracts. A number of clients have turned to commodities for good profit over recent months. Once you have been through the process of familiarising yourself with a contract a couple of times, it becomes easy. You might find yourself trading something more exotic than Soybeans?

Until next week......

Noel Campbell