Wheat shows huge volatility.

Here is the two minute chart from yesterday’s main trading session.

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Notice there is one bar there where the price leapt from around 1160 to 1350 (limit up). That’s a 190 point move – $9,500 per contract – in two minutes. I had been stopped out of my long trade in the general chop prior to this sudden move.

Trading markets as volatile as this is very difficult – and risky. It is vital to have proper money management in place to ensure that your risk exposure is kept under control. This should mean that traders with smaller accounts are held out of the market altogether, and that those with larger accounts are trading a reduced number of contracts. This is being reinforced by the exchange which has once again raised margins on wheat (to $5,400 per contract). 

Trading costs can also be high, because slippage on stop orders can easily be 2 or 3 cents! At this time, trading discipline is absolutely paramount.

The expanded limit of 135 remained in place today. If there are no limit moves today or tomorrow, it will revert to 60 cents. I took a short position which didn’t go anywhere and stopped out for a small 3.75 point gain.

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