Trading Grains For A Living PDF

Trading Grains For a Living
 Part I: Contract Specifications

 Part II: Day Trading Setups
 Part III: Swing and Position Trading Setups
 Part IV: Additional Resources
www.tradethemarkets.com 1
Part I:
Contract Specifications, for Corn, Wheat

and Soybeans, or, “How much money do
I need to trade these things?”
How do the AGS work?
 Contract specification for all AGS is just like the emini

S&P futures.
 In the emini S&Ps, 1 quarter point tick = $12.50 and 1
full point = $50.
 $50 also equals the equivalent 10 point YM move.
 In the AGS, 1 quarter cent tick = $12.50 and a full 1
cent move = $50.
 So 1 full cent in the AGS is like catching 1 ES point or
10 YM points.
 The AGS have a similar “cent” movement each day that
lines up with the S&P “point” movement.
 Corn is typically the least volatile of the grains,
though that has changed recently with the high
interest in ethanol.
 Soybeans are typically the most volatile of the
grains. Wheat can vary depending on weather
conditions but is often in the middle of the 2.
 Maintenance Margin on ES and YM
Market Price Range of corn, wheat, soybeans and S&P futures
from April 12 – May 3, 2007
Corn Range:
349 – 394 (45 points)
$2250 per contract
Wheat Range:
448 – 520 (72 points)
$3600 per contract
Soybean Range:
708 – 760 (52 points)
$2600 per contract
S&P Futures Range:
1442 – 1509 (67 points)
$3350 per contract
 Catching a 20 cent move in AGS is like catching
20 points in the ES or 200 points in the YM.
This move in all cases equals $1,000 per contract.
 A full $1.00 move in the AGS equals $5,000 per
contact, or the same as 100 ES points or 1,000
YM points.
 If you are comfortable with the emini S&P and
the mini-
mini-sized Dow, then there is no reason to
trade the “mini-
“mini-AGS.”
 This would be like trading a “mini of the emini”
on the stock index futures.
Day Trade Comparison of Grains vs. Stock Index Futures
 Pit traded hours are 9:30 a.m. to 1:15 p.m.
central. This is where the volume is. Pit and
electronic trade side by side during this time.
 You can trade during the non-
non-pit hours from
6:32 p.m. to 6:00 a.m. central. This session is
electronic trading only.
 Electronic Symbols are ZS, ZW, and ZC
 Quotes: If C, W or S is trading at:
 $2.38 ½ it is quoted as 2384 (238 4/8)
 $2.38 ¾ it is quoted as 2386 (238 6/8)
What About Mini Ags?
 These are 1/5 the size of the full sized AGS and
trade in 1/8 cent tick increments, with each tick
measuring $1.25
 A ¼ cent tick = $2.50 and 1 full cent = $10.00
 Margin is $200
 I personally don’t trade these as I like the full
sized contracts, but they are great for getting a
feel of how the AGS work with 1/5 the
exposure
Contract months are different than ES and YM, which trades each
quarter. AGS have more trading months each year.
•Corn: Jul, Sep, Dec, Mar, May
•Wheat: Jul, Sep, Dec, Mar, May
•Soybeans: Jul, Aug, Sep, Nov, Jan, Mar, May
If you aren’t sure of the front month, just check the CME Group website:
Part II:
Day Trading Setups
Grains Provide Opportunities for Position, Swing and Day Trading
What About “Limit” Moves?
 Limit moves prevent trading outside of a pre-
pre-specified
interval from the settlement price of the previous day.
 Limits for Grains:
 Corn: was 20 cents now 30 cents, Wheat: was 30 cents
now 45 cents and Soybeans: was 50 cents now 70 cents
 These moves generally happen after grain sensitive
reports are released. For report schedule, check:
 www.cmegroup.com then search for “grain reports”
 www.nass.usda.gov
 Swing Trades can be hedged with options (go long
futures, then buy puts to protect against a limit down
move)
What About “Limit” Moves?
 For day trading, limit moves provide trading
opportunities.
 Example, is corn goes “limit up” and wheat and
soybeans are not “limit up” then these other
grains will generally rally (or vice versa if corn is
“limit down.”
 This also provides a hedging opportunity—
opportunity—if you
are short corn and it goes limit up, then buy
wheat or soybeans as a potential hedge.
Key Points for Day Trades
 There are times when AGS trade in a slow,
narrow range.
 And there are times when they “go nuts.”
 When the AGS are quiet, they all generally
move in about the same range.
 When the AGS “go nuts” Soybeans generally
move 3 to 4 times as much as corn or wheat.
Key Points for Day Trades
 I like to watch both pit and electronic
sessions on charts.
charts.
 For the pit session, I’ll look at a 3 minute
chart, let the markets trade for 30 minutes,
then start taking the breaks of the highs and
lows of the pit session.
 For the electronic session, I’ll look at an 89
tick chart, and look for 8/21 MA crossovers,
TTM Trend Changes, Squeezes, and Scalpers
Corn Day Trading Setup
Wheat Day Trading Setup
Soybean Day Trading Setup
Trade The Markets (TTM) Trend
What is it ?
 We use this indicator a lot, so we want to explain it
early in the seminar as it comes up on many charts.
 Modified Version Of the Heikin-
Heikin-Ashi Technique.
 It’s just a easier way to look at candle sticks.
 The heikin-
heikin-ashi method (heikin means "average" or
"balance" in Japanese, while ashi means "foot" or
"bar") is a visual technique that eliminates irregularities
from a normal chart, offering a better picture of trends
and consolidations.
Trade The Markets Trend
how is it calculated?
 The heikin-
heikin-ashi candlestick technique uses modified open-
open-high
high--
low--close (OHLC) values and displays them as candlesticks but I
low
had them converted to paint bar studies . The modified values
are computed using these definitions:
 haClose = (O+H+L+C)/4
 haOpen = (haOpen (previous bar) + haClose (previous bar))/2
 haHigh = Maximum(H, haOpen, haClose)
 haLow = Minimum(L, haOpen, haClose)
Part III:
Swing and Position Trading Setups
Soybean Trading Setup
Corn Swing Trading Setup
Wheat Swing Trading Setup
Weekly Charts – Even if Your Just Day Trading
Soy Position Trading Setup
Corn Position Trading Setup
Part IV:
Additional Resources
Attitude of a Trader
 Right attitude will make or break a trader
 Biggest obstacles are Greed and Euphoria
 Greed Kills
 Greed takes over and mistakes kick in:
overtrading, not sticking to parameters, yelling at
screen
 All you can eat buffet: no reason to overload
your plate on 1 trip; you can keep going back
Attitude of a Trader (cont.)
 Euphoria is worse than Greed
 Things are going great – so double up!
 This is like eating a great dinner. It tastes really
great.
 So, to make your life even better you order a
second plate
 This will only end in one way:
 Badly: Develop a business plan and stick to it!
Book released December, 2005
John Carter
Trade the Markets.com
[email protected]
www.tradethemarkets.com
512--266
512 266--8659

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Trading Grains For a Living

 Part I: Contract Specifications

Contract Specifications, for Corn, Wheat

 Contract specification for all AGS is just like the emini

Day Trading Setups

Swing and Position Trading Setups

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