An analysis of speculative trading in grain futures

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Commodity Futures Trading Commission, 1978 - Business & Economics - 134 pages
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Page 49 - In the Dictionary of Occupational Titles published by the United States Department of Labor, there are 21,000 different job listings together with 14,000 alternative job listings.
Page 52 - ... recently a similar project has been started in Missouri, Kansas and Oklahoma under the leadership of the Division of Cooperative Marketing. Much material on research in this field has been published and only a selected list can be suggested here. Probably the best sources of general information are The Report of the Federal Trade Commission on the Grain Trade, Vol.
Page 129 - ... the tendency for small speculators to absorb most of the losses comes from a more recent and comprehensive study by Stewart of the trading behavior of small speculators in grain futures.22 From an analysis of more than 400,000 individual futures transactions extending over a nineyear period he found: There were 6,598 speculators in the sample with net losses, compared with 2,184 with net profits, or three times as many loss traders as profit traders. Net losses of speculators were approximately...
Page 104 - The tendency of longs to buy on price declines and for shorts to sell on price rises indicates that traders in the sample were predominantly price-level traders. Longs tended to buy when prices fell below levels which they considered proper, and shorts tended to sell when prices rose above levels which they thought appropriate.
Page 129 - ... widely accepted. The first obvious conclusion from the analysis is that the great majority of small speculators lost money in the grain futures market. There were 6,598 speculators in the sample with net losses, compared with 2,184 with net profits, or three times as many loss traders as profit traders. Net losses of speculators were approximately six times net profits, or nearly $12,000,000 of losses, compared with about $2,000,000 of profits. Speculative traders in the sample lost money in...
Page 129 - ... speculators was +0.69, and the small speculators and price —0.74. JWT Duvel and G. Wright Hoffman, Speculative Transactions in the 1926 May Wheat Future, US Dept. Agr. Dept. Bull. 1479, p. 39, 1927. pie, the average duration of profit cycles was 10.5 days, compared with 16.3 days for loss cycles. . . . Speculators who did make profits on individual trades were inclined to cut them short . . . there were 42,668 profit cycles [in wheat] compared with 34,373 loss cycles. But the average gain on...
Page 131 - Was the sample in this respect not typical of small speculative traders? There is no apparent reason for pronounced bias in the direction of losses. If the sample is representative, is there another group of traders who consistently make profits large enough to balance the losses of small speculators? There is no convincing evidence that such large profits are made by any class of traders. These are questions which can be answered only by further studies of the results of futures trading.
Page 129 - ... Speculative traders in the sample lost money in each of the four grains traded — wheat, corn, oats, and rye. Primarily responsible for the high ratio of losses was the small speculator's characteristic hesitation in closing out loss positions. An often-quoted maxim for speculative trading is "Cut your losses and let your profits run.
Page 129 - SUMMARY This study is concerned primarily with the trading behavior of small speculators in grain futures, and the results of their trading. Statistics were analyzed on the futures operations of nearly 9,000 traders, extending over a 9-year period (1924-32) and involving more than 400,000 individual futures transactions. This...
Page 131 - Yet the nature of futures trading is such that all losses are balanced by profits. This raises the most important question left unanswered by this study. Was the sample in this respect not typical of small speculative traders ? There is no apparent reason for pronounced bias in the direction of losses. If the sample is representative, is there another group of traders who consistently make profits large enough to balance the losses of small speculators?

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