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Cold Trade #1 - Setup & mini-contracts

Nick and I (Eugene) began learning about the commodities market two years ago with Roger’s and Olga's help. Previously, we had some experience in the stock market outside of the US, but we knew nothing about the futures market other than it existed for commodities and stock indexes.

A year later, in December 2022, we were encouraged to start trading in our own account.

This blog will cover our trading journey, sharing with you what we’ve discovered. We’ll try to keep it short and to the point, discussing one topic at a time.

We hope that it will help you to learn the market and maybe inspire you to start your own trades (either hedging or speculating).

Blog was titled “Cold Trade” because we want our trades to be unemotional & well-planned and also because we were raised in Siberia, and people tend to think it’s cold there. By the way, it was -37°F there in mid-December.

Our account was opened in Dec 2022 with a $10,000 deposit of our earned money.

The main idea was to enhance our market education while trying to earn some money with speculative trades or not to lose it, at least.

First trade was made in January 2023 by selling (short) soybeans mini-contract of 1,000 bushels (code XKK23 on exchange). It was based on Roger’s recommendation to grasp 20-40¢ of seasonal decline.

One contract was sold on Jan 18th at $15.45 and bought back the next day at $15.19.

P&L (or PnL, Profit-and-Loss) was $260, minus $55.70 commission, resulting in net-profit of $204.30.

Later in February, three more trades were made. A long trade of 2 micro crude oil contracts (code MCL) with net-profit of $1,200 and two long trades of mini-soybeans with net-profit of $116 and $168.

The lesson we learned was that there are mini & micro contracts that we can trade on our small account to keep the risk reasonable. But the commissions on those contracts are way higher per unit (bu., ton, etc.) and we should use large contracts when it is possible because commission cannot be avoided.

There are mini-contracts for corn, soybeans and wheat of 1,000 bushels, also mini & micro contracts on crude oil, minis for natural gas, gold, silver, copper, euro currency and indices like S&P500, Dow Jones, Nasdaq, maybe some other markets.

Opening a brokerage account is no more difficult than opening a bank account, choose a broker you can trust.

I recommend one starts with $30,000-50,000 in the account to be able to trade most markets, keep the risk and stress low. We will talk about risk and money management next time. We started our trading with what we had, and you can too. Don’t try to trade big with all your investments from the beginning, start slowly, even with a single mini-contract and get comfortable.

So far, we have made 48 trades this year, 54% of them were profitable, but because of the 1.98 profit factor (profit to loss ratio) we were fortunate to triple our investment while making small and huge mistakes.

Trading boosted our knowledge and encouraged us to study further. For sure, nothing is a better teacher than real market experience.

I plan to write once a month or so, for now. Next entries most likely will be about keeping the records and risk & money management.

See you next time!


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