Wednesday Soybeans Trade #8

This last trade occurred in the closing minutes of the trading day. The grains futures close at 12:15 MST each day. Oftentimes, the best trading occurs in the closing minutes, when futures traders are liquidating the positions they have established earlier. This often causes volatility that is profitable and moves strongly in one direction. Using tick charts helps in this respect, because it shows strong shifts in market sentiments very quickly; tick charts are highly responsive to market sentiment.

Recently, I have been trying a new technique that relates to how many contracts I trade and getting in and out of them. Phantom's Rule #1 requires that I be adding and removing contracts constantly. However, oftentimes, I will find that at key inflection points at a market reversal, I would normally exit all my positions when the tick chart shows signs of reversal. However, often before than time, I will see leading signs that a reversal may come soon. My new technique is that when I see these leading signs, I tighten my stops on PART of my overall position. I exit very quickly on these contracts, usually about half of my total position. Then, I will hold the rest of my positions with the expectation that the new trend will return and prices will continue in the original direction.
By exiting half of my positions with a profit, I am locking in some profits. Then, I can afford to allow my remaining positions to ride out the market noise. This gives me a cushion, so that even if the remaining position goes negative temporarily, I have enough of a profit cushion from the half that I exited so that I can afford to take a slightly higher risk on the ones I kept open. I will expand on this idea in future blog entries.