In my younger days, I'd been doing pretty well with corn, soybeans, and pork bellies. I decided to try my hand applying my "system" to lumber. Bear in mind, I knew little about either lumber or lumber trading… My broker did his best to talk me out of touching lumber contracts at all, regardless of my small fry status. Being young and thinking I knew better, I placed my order to enter the trade, and gave him a stop based on my current parameters (which was fairly wide for what I thought was the current market). I was stopped out shortly thereafter with a quick loss, never to trade lumber again. You can put in a stop-loss order if you don’t want to lose a lot of money. (Did I mention the stuff is everywhere?) But understand this – you will be stopped out, regardless of where the market is. (The guy on the floor has to make money somehow). And a market order is just, well, a really bad idea.

Rocky Humbert comments:

I too find getting hit over the head with a 2×4 often preferable to trading lumber. If they don't hammer your stops, they'll nail you with the contango. The only market that seems to go limit up and limit down more frequently than lumber is pork bellies. I blogged about the day last August when bellies were limit up and limit down at the same time. (This really happened. Not a metaphysical phenomenon or alternate universe!).


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