Cattle/Lean Hog Strategy..your thoughts?

R

rcolton

So here is my new day trading strategy for the Live Cattle and Lean Hog Contracts.

Daily goal is $300/day minimum with a strict policy of not chasing extra profits once threshold is reached.

Principles are: do not trade the opening volatility, 1 or 2 trades per day, trade break outs and persistent trends, place tight slop loss orders after entry.

The strategy entails following the daily trade and placing 1 or 2 trades each day of 5 contracts or 10 contracts. Each tick gains $50 for 5 contract positions, $100 for 10 contract positions. Commissions or just under $10 per contract.

My question is, does this strategy of short 'get in get out' trading have a high likelihood of making the $300 per day objective assuming on 1 or 2 trades will be made each day with significant evidence of a daily trend? To me it's an aggressive trade witha conservative strategy as opposed to the deadly 'scared money' systems of aggressive strategy and conservative trade.
 
Quote from rcolton:
----my new day trading strategy for the Live Cattle and Lean Hog Contracts.
----Daily goal is $300/day minimum with a strict policy of not chasing extra profits once threshold is reached.
----do not trade the opening volatility....
----Commissions or just under $10 per contract.
----does this strategy....have a high likelihood of making the $300 per day objective
----significant evidence of a daily trend?
----it's an aggressive trade with a conservative strategy as opposed to......
More...
1) It would be "better" to swing trade the livestock contracts. It would be better to daytrade a higher-volume, electronic-based, financial-contract instead.
2) The problem with "capping" your daily profit at $300/day is that you will leave a lot of money on the table and miss out on bigger trends and then have to "work" harder to earn that money.
3) Most of the day's trading range can occur early in the session. It'll become tougher to hit your profit goal if the market stagnates the rest of the day when you're "ready" to trade.
4) It would be better to trade electronic-based contracts with lower fees/commissions and instant access. (Do hogs and cattle trade on the screen, the pit or both? It's been too long since I've actually traded them.)
5) The "strategy" can work but its disadvantages are well apparent.
6) Daily trend?....Re-read what I said in (3). How much of the trend will pass by before you're confident enough to jump onboard?
7) It's an aggressive strategy. There's nothing "conservative" about livestock trading. :cool:
 
I make my living trading cattle...so I won't comment beyond this:

The cattle market is one of the most predictable markets out there imo. Having said that, it shifts week to week (sometimes day to day) as to whether it wants to be a mean reverting, or trending market....and it tends moreso to be a mean reverting market.

So, one approach doesnt work. If you are a breakout or trend trader, you better be ready to be chopped up. If you are a RTM trader, you better know when (and be able to accept that) you are wrong on very quickly on the days when cattle want to make a trend, because on those days those trends don't let up.
 
Quote from nazzdack:

1) It would be "better" to swing trade the livestock contracts. It would be better to daytrade a higher-volume, electronic-based, financial-contract instead.
2) The problem with "capping" your daily profit at $300/day is that you will leave a lot of money on the table and miss out on bigger trends and then have to "work" harder to earn that money.
3) Most of the day's trading range can occur early in the session. It'll become tougher to hit your profit goal if the market stagnates the rest of the day when you're "ready" to trade.
4) It would be better to trade electronic-based contracts with lower fees/commissions and instant access. (Do hogs and cattle trade on the screen, the pit or both? It's been too long since I've actually traded them.)
5) The "strategy" can work but its disadvantages are well apparent.
6) Daily trend?....Re-read what I said in (3). How much of the trend will pass by before you're confident enough to jump onboard?
7) It's an aggressive strategy. There's nothing "conservative" about livestock trading. :cool:
More...

yes they still trade very good volume in both the pit and on the screen...volume is basically split 50/50, but the total screen migration has definitely started.

Agree completely with avoiding the opening range...Opening and closing range is still the best areas to trade in cattle.
 
thanks for the response. Cattle trade pit and electronic and I agree, lower commissions would be better but I'm in Canada and its pretty well the best available. I should have described the profit target better, it's a goal or minimum. somedays open low and close high or visa verse and once I have a suitable stop in place and playing with the houses money so to speak I have no problem riding the wave for higher profits. You make a good point about the market stagnating after the open. Somedays this is the case but the vast majority are not. I've made a decision to largely avoid the volatile open and the potential losses it can accumulate at the cost of risking the odd day once or twice a month where it may be difficult to make money. The reason I've selected the cattle contracts (lean hogs will be used too) is because of the low margin (1050 for cattle and 1400 or so for hogs), large multiplier relative to daily volatility (40,000lb weights per contract) and easy selection of contract month (each has an actively traded contract which is quite liquid). A person can easily make $500 per day using this because you're only trying to collect 5 ticks of profit per day out of daily range of about 90 ticks. Though your point on the opening volatility is dually noted and appreciated.
 
Quote from rcolton:

thanks for the response. Cattle trade pit and electronic and I agree, lower commissions would be better but I'm in Canada and its pretty well the best available. I should have described the profit target better, it's a goal or minimum. somedays open low and close high or visa verse and once I have a suitable stop in place and playing with the houses money so to speak I have no problem riding the wave for higher profits. You make a good point about the market stagnating after the open. Somedays this is the case but the vast majority are not. I've made a decision to largely avoid the volatile open and the potential losses it can accumulate at the cost of risking the odd day once or twice a month where it may be difficult to make money. The reason I've selected the cattle contracts (lean hogs will be used too) is because of the low margin (1050 for cattle and 1400 or so for hogs), large multiplier relative to daily volatility (40,000lb weights per contract) and easy selection of contract month (each has an actively traded contract which is quite liquid). A person can easily make $500 per day using this because you're only trying to collect 5 ticks of profit per day out of daily range of about 90 ticks. Though your point on the opening volatility is dually noted and appreciated.
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If you are looking for a "breakout" market...why not look at the hog spreads?? PLENTY of volatility there, and when they start trending intra-day, they TREND. Those may better suite your style.
 
wow thanks a ton for the comments TX...I've been trying to characterize and get a feel for the market but had been struggling because once I thought it would trend for thed ay it would revert back down etc... so you comments kind of slapped me in the face for a wake up to realize thats is how the market goes. It trends strongly when it has clear info to go on and when the info is mixed, like this week, we see huge volatility at the open in one direction, then reverts back through the open the other direction and trends back up or down to the mean from there...

would you be so kind as to offer any other words of advice to a new trader looking to make a living off trading cattle himself? how is your strategy structured or what would I learn from it if you want to keep it to yourself?
 
sorry...the cattle market is small. Heck, even the group of guys that are in the cattle markets day in, day out is small...and very close knit.

If you are a new guy, not to be rude, but you have to earn your spot so to speak...when you find what works for you in cattle, you won't want to divulge it either.

Much like if I were in the CIA...if I told you my strategy...I'd have to then kill you :D Best of luck though in your endeavors.
 
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