Trade Soybeans now

Geometric Thinking Update

By Jim Fredrickson

I realize that most of my readers trade crypto and little else.  But I want to urge you to re-consider this rather myopic view of trading.

I agree that it is a good idea to specialize in just a small handful of markets. Far better to know a few markets like the back of your hand, than know next to nothing about a large number of assets.

But as some of you must have read, this years grain harvest was abysmal.  In many cases, farmers entire crop was lost.  Such losses were not just limited to one two locations, but pretty much across America, and in other parts of the world as well.

The so-called ‘trade war’ with China has kept a lid on rising prices for a few months now, as China has shifted to buying from South America in response to Trump tariffs.  But, even without Chinese buying, prices will inevitably go up sharply, imho, as grain stocks dwindle.

Looking at this daily chart of soybean futures, my guess is that the price rise begins now.

For those of you who have never traded futures, it is a bit different from trading coins.  Reading the charts is the same, but for each futures contract, you are controlling 5,000 bushels of beans.  Price is quoted in cents/bushel.  That means a price of 900 means that each bushel costs $9.00.  So, a 1 cent rise, to $9.01, is a $50 move.  A move to 1000 ($10.00/bushel) is a $5,000 move.

Bearing that in mind, look at this longer-term chart, showing the high in 2012 at 1800.  That is ~ 2x today’s price.  That 2012 high was not driven by the grain-apocalypse the world is facing this year and next.  You do the math…

Futures are highly leveraged, so the rules about 'being careful' apply.  Stop losses are non-negotiable, and one needs to be aware of when the contract expires, so that one exits their position before they are required take delivery of 5,000 bushels of beans!  But don't fret, it's not hard to learn about such things.  Feel free to contact me if you need any help.

This is not financial advice, just words of wisdom from someone who has seen it all over the past few decades.  Do with it what you will.  Happy Trading!

Tradingview.com is a must-have tool in this business.  Get an account, if you haven’t already.

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