How to trade Soybeans the right way:
Introduction – About futures and Soybeans:
When i first started trading futures, back in November 2019, not a long time ago as you can see. I saw the soft-commodities market as a great start since its correlation with the Stock Market is almost null, so I could diversify my exposure to Forex and Stocks in my algorithmic trading portfolios.
I started trading the Futures Market with algorithms as a challenge to improve and learn something new, and since i discover how it works i loved it.
This strategy is the first one i’ve deployed on the market, at the moment, i only had one code created (it was my first day using Tradestation), a searching tool for seasonal inefficiencies in Tradestation, a Trading Strategy that i also use in Forex and in fact i teach it on my course.
I’ve selected the Soybeans futures continuous contract almost by random, since i was only checking how fast the platform optimizes, and then i saw the result and the rest was history.
Before i talk about the strategy, i suggest that you watch this video if you want to learn about Soybeans futures and how they work.
Trading the opening of Soybeans futures – The strategy:
At this point, specially if you are a newbie, you may think that i’m talking about some hard mathematic model to predict the market, but no. This strategy is in fact very simple.
The raw edge is as follows:
- Buy the market opening and hold for one hour, then sell.
Is that simple, yes. Of course this strategy is not filtered, its a raw inefficiency and you are going to need to put some filters in this in order to make it less risky to trade. But first of all, let’s see the results of the backtest:
As you can see the performance of this strategy, even without of filters is very great. But, as always, you are going to need to work it.
I mean, in this curve we can see more than 2,600 trades, so most of the drawdowns are hidden in that number, but if you look closer you can see there are a few bumps on the road. Nothing than a filter or two can’t help.
First of all, i have to say that I have this strategy working in Tradestation, so the margin is relatively high with respect to potential profits, that’s why I say that it is a system with little volatility, during the last operations for each contract it assumed an approximate average volatility of about $100 at the close of the trades, using about $1,800 in margin.
All this can be summarized with something like: the margins in Futures are too high, and since the data is centralized, the commissions lower than the nominal and the spreads are usually lower, it is usually interesting to have strategies of shorter term and highly diversified time portfolio. A system operates at the opening of the Soybeans futures market, another one at the entrance to the European session, another before the American Session … etc.
Regarding filters, consider the market trend, the months where it works best and its characteristics, with a little practice you can get it out quickly, but these are homework for the reader, things take time and in this way I force you to study before trading.
I hope this strategy can help you get started in the financial markets, but as always, things with caution, always studying everything and taking risks.
Finally, outside of volatile seasons or crises like the current one, in other brokers it is usually “cheaper” (less margin required) to operate this type of strategy.
Hope this can help you, Víctor.