Trading Jenga: Where Are The Profits?

Trading Jenga targets many leading indicators in search of trading income. Trading income can be deceptively lost by failing to understand the cost of margin accounts. Money tied up in future or options trading has an imputed cost: income associated with alternative investments. Trading oil or gas rather than coffee or tea is a decision which rests on instincts and timing.

Examine long-term changes in the futures open interest as a method to make important trading decisions. Short-term changes can be deceptive. Would a market which has an open interest of about 50,000 in 1995 and 240,000 in 2008 have the traits a great trader seeks? Yes! The coffee market is scalable and a force of nature.

The open interest in the coffee market dropped about 18% between 2008 and 2015 and five major trading houses exited coffee with sales of their coffee portfolio or position elimination. The current open interest in the coffee market is 195,212 per the CFTC posted Trader Commitments short form on October 30, 2015. Weather options and cocoa futures may have relationships with the coffee market for potential paired trades or “trading in tandem”. This should also be true for physical and financial trade pairs. This type of situation would be the desk of Dreyfus, INTL IFC Stone, or CCI.

Why did Goldman Sachs exit the coffee market in a major way? Did the fair trade coffee industry steered by Starbucks create global coffee market changes which impact major trading house decisions to run money out of coffee and into natural gas? Learn about how global industry changes impact your area of trading and profit taking. The Marcellus shale appears to be equivalent to the “Fair Trade Coffee Market”. It is a major supply shift and shakes the connected basis differential drivers of storage and mainline transmission costs in the areas of the North East, Midwest, and Canada.

Trading is a talent which is difficult to teach if the underlying skill set is missing. Trading talent often is enhanced by the concept of dimensional relationship identification and high IQ. Examine portfolio positions in a graph form to witness patterns emerge in major ways. The vision of basis erosion may surprise your trading experts.

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