Employing Trade Management in November Soybean Position

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We are coming back to the November Soybean market today as important price levels have been reached. First of all we’ll get the mention of the psychological 10.00 per bushel out of the way. Psychological price levels don’t effect, in our opinion, supply and demand considerations, nor should they effect, taken on their own, trading decisions.

What we do find significant is that key Fibonacci retracement levels have been reached or nearly reached. Today’s high so far has been 1012.25 (we are preparing this at just about Noon Chicago time) and that takes it above the .618 retracement resistance level from the August 11 high of 1066 to the October 5 low of 878.75 which was approx. 994.50. It has also come within a whisper of the .618 retracement level using the June 11 high of 1099.50 and the October 5 low of 878.75 which is approx. 1014.75.

This is a situation where depending on the individual certain options can or should be considered. We would say at the minimum stop protection should be raised if it hasn’t been already. Another option is to liquidate a portion of the position while also raising the stop protection. And then, some traders may decide that this is a good place to liquidate their entire position and watch for further developments.

Truly we never know when or at what price a market will make a high or low. For this reason we tend to favor reducing exposure but leaving some portion of the original position on the books in case a particular market catches fire. If the price continues to move favorably stop protection can and should be raised too. This is something that we discuss with clients on an individual basis.

We believe trade management is the biggest contributor to trading success in the long run. Take nothing for granted; don’t try to out guess or second guess. Adopt discipline and patience into your strategy. We believe you will appreciate the benefits over time.

As far as moving stop protection in the November Soybeans we would suggest either to a break even level or using a close beneath the 50 day moving average which is currently approx. 960. If nothing else we suggest stop protection be placed at least at 927.50. 927.50 puts it just below the .618 downward retracement using today’s 1012.25 high and the 878.75 low.

We are noticing the Wheat extend its gains as we are writing this. The December Chicago Wheat contract has reached that first level of 511.75 where we suggested considering raising stop protection. Some traders may have other ideas of how to approach this price advancement. Let us know if you care to share.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.