Day Trading Grain Futures

A practical guide to trading for a living

David Bennett

• Publisher: Harriman House
• Year: 2017
• eBook ISBN: 9780857196606
• Edition: 2
• Topic: Business
• Subtopic: Financial Accounting
• Index: Business

UPDATED & EXTENDED 2ND EDITION This practical book provides you with everything you need to be able to day trade grain futures effectively. It opens with chapters explaining the author's preference for the grain futures markets, and his reasons for preferring to day trade, before going on to explain the fundamentals of trading and the more specific knowledge required for his chosen approach.In a concise, punchy style the reader is introduced to some timeless trading concepts, and shown how these ideas can be moulded into a trading system to attack the exhilarating grain markets. No sophisticated indicators or complex mathematics are found here. Instead, the author builds a system based on tried and true trading principles, combined with sound money management strategies.The particular challenge for a day trader during the volatile market open is to quickly identify support and resistance zones, and form a view on trend direction, based on limited information. The author describes how he does this, with detailed illustrations and real life examples. He then goes on to explain exactly how, based on the initial market movement, he determines stop loss and target levels.A key feature of the book is the chapter tracing the progress of a real life trading session. It shows the author's methods being applied in practice, with numerous screen shots giving the reader an understanding of what the trading process feels like in practice - effectively giving you a fly on the wall view of the author in action.Another highly illustrated chapter shows a complete month of trading charts with commentary on trades taken, giving the reader an appreciation of the longer term trading process. A process described by the author as "constant repetition of a simple plan, concentrating on implementation excellence".Other chapters outline the author's views on the need for practice, and discuss the practical points a home-based trader should attend to in their computer and internet set up.The book's focus is to highlight the exciting opportunities of grain futures and provide the vital detailed and hands-on information that will make it invaluable to all futures, equity, options or CFD traders.

Part I:
Day Trading Grain Futures

Chapter 1:
Introduction

I make a living day trading grain futures.

It’s a great life and I love it. Trading is not just my job; it’s an addictive, absorbing hobby. Get it right, and it’s the best job in the world.

This book tells you how to trade with good technique. There’s no guarantee of riches, but the odds are with you if you do it well.

Trading for a living means I’m not interested in systems which are profitable in the long term, but subject to months, sometimes years, of losing periods. I want losing weeks to be rare and losing months virtually unheard of.

This is no general trading textbook. I focus on a specific trading niche, and how to exploit it. Nor does it contain chapters on trading psychology. All I will say on that subject is that it is one thing to have a trading plan, but quite another to have the willpower to stick to it.

There are many textbooks out there and if you study the literature you will quickly come across three important trading ideas:

1. support and resistance
2. the trend is your friend
3. it is best to let winners run and cut losses quickly.

This information normally comes in chapters 1 or 2 before authors get their teeth into the meaty topics of their books – be it sophisticated technical analysis, complex option techniques, arbitrage, seasonal spreads or whatever.

After all, trading is for smart people, right?

The good news is that these three very basic trading ideas, so frequently skipped over by the tyro seeking a silver bullet, contain the wisdom needed to trade fast-moving markets successfully.

Ideas are one thing. Turning them into a profitable day trading strategy is another matter, and it is the purpose of this book to show you how I do that.

Chapter 2:
Why Trade
the Grains?

I am often asked why I trade the grain contracts, as opposed to the popular stock index contracts, treasury bonds or currencies. The answer is that I find the grain contracts easier and more convenient to trade. On occasions, I will trade other commodities, but not often.

Volatility

A day trader likes volatility, and the grains have more than enough to keep you happy. Without substantial price movement in each session, there is not enough scope for a day trader to make good profits. With the price per bushel moving anything from 20 to 60 cents in a session (sometimes much more), there is ample opportunity to profit when you consider that each cent the price changes translates to a $50 profit or loss on a futures contract.

Typically, corn has the least volatility, soybeans the highest volatility and wheat is somewhere in the middle. This is normally reflected in the margins. (Recent volatility in the wheat market made it more volatile than soybeans, with a higher margin, but this has not been the typical historical situation.)

Volume

Volatility is all very well, but you also need good volume. Otherwise, your trading is likely to be adversely affected by slippage. The front contracts in the grains all score very well in this respect. Typically, corn has the highest volumes, followed by soybeans, and wheat is third.

In most market situations, you get away with around a quarter point of slippage on stop orders, although recently it has been wise to allow half a point for wheat.

Trading hours

I like to trade the open, when there is the greatest volume and big price swings. With twenty-four-hour trading in the index and currency contracts, there is no clear-cut open any more. The grains, however, have a distinct open at 08:30 (US Central Time). I c...

Table of contents

• Contents
• About the Author
• A Note on the Second Edition
• Preface
• Prologue
• Part I: Day Trading Grain Futures
• Part II: Reflections 10 Years On
• Bibliography
• Publishing details