July wheat 2016/06/06 3:06 PM GMT 0 comments Tweet

The July wheat was up overnight extending the rally of the last few days; after a slight push to 5.14 hitting resistance the price action retreated to open levels and continued ranging until the close at 5.06 1/2.

I thought it was breaking lower but bounced; preferred to take the loss now.:

WN16 Sell to open 1 504.00 6/6/2016 12:47:14 PM
WN16 Buy to close 1 505.50 6/6/2016 1:14:40 PM -75.00 11.92 -86.92

I think I have already spoken about grain markets being quite appealing to me because there is less noise, the pace of the market is a bit lower comparing to indices as well as the grains tend to trend more often and more clearly. Now it's time to share some very simple and very well-known for grain traders trading strategy.

This is establishing support and resistance levels and trading the break-outs. As a rule the first trading hour is very hectic and volatile, that's the time when we stay in the sidelines and waiting patterns to establish and get hints from the market where it is going. After the first trading hour, this would be between 9 am and 10 am on the chart, we draw the resistance line at the high of the early activity and the support at the low point of the price action. From here we go in the side lines again and wait for the price action to break either way. Always it is good to remember that if it breaks in the direction of the trend it is much stronger entry signal rather if it breaks against the trend. Everybody knows that the trend is their friend. In our case the price breaks below just before 12 pm, goes lower and hits a new support bounces and closes in a range. Thus at about 12 pm we are entering short and once first two long candles are established we exit as signs of new support appear as well as market closer to the closing bell.

This has been some stupid trade at the last half an hour of trading day, shorting ZWN16 (wheat Jul contract), when there was no time to break lower.

WN16  Sell to open 1  462.50  5/23/2016  1:50:17 PM   
WN16  Buy to close 1  462.25  5/23/2016  2:14:09 PM  12.50  11.92     0.58

Futures contracts have specific tickers or codes which carry certain information about contract's specifications. Most of the brokers fully specify the contracts by showing the ticker code, the month code and the year code.

The ticker code in grains would be C for Corn, W for Wheat and S for Soybeans. By putting Z in front of each of these tickers indicates it is electronically traded contract - ZC, ZW and ZS. The next code would be the month of expiration: F January, G February, H March, J April, K May, M June, N July, Q August, U September, V October, X November, Z December. And the number at the end is the year 2016, 2017. Thus ZWK16 contract is an electronic wheat May 2016 contract.

In July last year there an era in trading came to an end - the open outcry grain futures pits were closed for good. No matter of this fact the grain futures remain one of the least markets untouched by algo-trading and dark pools; although all trades are executed electronically, the machines have not entered that market as of yet as it happened with equities and indices and this is the last market good for day trading. I believe exactly because of that trading grains appeals to me that much.

What I like about day-trading grain futures is that while there is enough volumes and volatility to make significant profits during the day, (It is very similar to the ES-minis. In grains one quarter point of a cent move equals to $12.50 gain/loss.) on the other hand, the grain markets are not that noisy as indices and they tend to trend much more often; if a trend is established intraday, it continues; it is easier to identify and trade breakouts of support/resistance lines.

The other appealing feature of grain futures markets would be the trading hours. It has very distinct trading hours which is not observed in indices nowadays which with extended hours could be traded 24/5. I found for myself that I prefer to have fixed trading hours. The grain futures trading begins at 8:30 a.m. and the market closes at 1:15 p.m. CDT at Chicago Board of Trade.

Jumping from the ES-minis to grains as in my case at first could leave wrong impression of a slower market but after giving it a try, I found in that slower pace the charm of it. With that less noise and unnecessary hectic moves comes less stress and pressure. It frees the mind from constant monitoring the market and gives the ability to make the right set-up and follow all the way from entry to exit.

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