Trading grains

Quote from cheeks:

Can you recommend any books on trading grains. I use to have Schwagers book on Fundamental analysis, but I somehow lost it.:( Not looking for a TA book, but more just background on how the market works, interpreting crop reports etc. I will be trading on TA, but I would like to be able to understand the news enough to gauge the markets reaction to it.

thanks
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I'm not sure about this, but I've heard of people use a book by Granville? It's older but I think many still refer to it. I'd be curious to see some great books on the grains if anyone know them. Alot of grain traders have experience on farms. Not the scalpers but the traders. They seem to be the ones that understand when normal amounts of rain are too much and how the crops will respond, etc. . So really not sure about the books.
 
Quote from jaming5002:

As for the poster who says the MGEX leases are $50/month, where did you find this, I can't seem to find a lease price on the MGEX. I'm assuming this means none are available right now.
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You should call them up and see how much the current offer is for a seat. There are 420 memberships and definitely not that many traders, so I am sure there are seats available to lease. Even if there is no current 'offer' on the books there are seats available to lease for sure. Seats don't get leased everyday and there are many 'excess' memberships which would explain the lack of a current offer.
 
I am also posting this link to a picture of the trading floor as seen from the visitors balcony.

http://www.mgex.com/images/sub/releases.jpg

The number of traders are representative of what you can expect today. During times when it gets really crazy, you'd see a larger crowd, but this is typical. The booths in the foreground are brokerages and clearing firms.

You don't get the full effect from the pic. But the MGEX has one of the most beautiful trading floors anywhere. The ceiling is three floors high and the room is lit by natural light. They remodeled the trading room a few years ago restoring the classic 1880s, plaster architectural details.
 
Here is a file showing daily MGEX data for the March 03 Sping Wheat contract for the last month.

Note that some days are really slow but other days are in that sweet spot with a volume from 5K to 10K contracts.

The 1.7K day listed a few posts ago has got to be one of the slowest one could pick.
 

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Amazingly I get quite different (much lower) figures from eSignal.

Symbol MW H3, has never had volume above 3k contracts in january!

Where do you get your figures from?

alberto
 
I was looking at those volume figures again. Although the data I requested was for the March 03 contract, I suspect the volume is for all months combined.
 
As much as I love Minnesota lakes in the summer, I think it would be tough to trade a pit that thin and depend on it to make a living.
 
Thin markets can be profitable for market makers as long as there is paper coming in off the floor. If wheat keeps moving, there will be paper.

Now about the volume figures. Calendar spread trading is very important in wheat which is something emini traders never do.

For example, if March 03 has a volume of 1,7K, then May 03 will probably have the same volume and that will be 80% of the total volume for that day. THAT is the market you are trading. You are trading the first TWO months. So when my excel spreadsheet that I uploaded says the combined volume was 8K, there would have been 3K in the front month and 3K in the second with 2K spread out in the later months.

That doesn't seem alot for the emini screen trader, yet the floor seems very busy and trades continuously during the active days. (During turns and at the close, the action on the floor is an outright riot.) On the slow days, some will do emini trading. Alot of the traders make markets in MW futures options or spread Mpls/KCT or Mpls/Chi.

There are mid 6 figure traders there and a number making from 60 to 80K a year. (Please don't chime in at this point with remarks about how that is not alot of money. There are many people here who would be happy to make that amount for a job that lasts 4 hours a day.) I know a guy who does well specializing in making markets in the out months. Talk about a thin market. His wife (another wheat trader) sometimes appears in the ET chat room.

With 5 to 8 cent typical intraday ranges (at $50 a cent), if you snag a handful of contracts and trade them for a good chunk of the daily range, you can do ok. Wheat has the capability of moving much, much more (esp if we enter a period of inflation in physicals). I know for bone or other arbs, this market is not large enough. But its a niche. A niche has certain protections, certain benefits and certain limits. For many, this market would be a good deal.

Here is a link where you can create Mpls Wheat charts and check out the intraday ranges. (Spring wheat MW is the contract that trades most actively at the MGEX.)

http://exchanges.barchart.com/intra/mgex/mcharts.htm
 
Puffygums, I think your last post has gone to the point:

"if you snag a handful of contracts and trade them for a good chunk of the daily range".

Many people here do scalping, and they think this is not feasible in grains: I second this opinion, unless you're on the pit.

On the other hand, grains move in trends, and that's where you can make money: that would be true even for daytraders.

alberto
 
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