The coffee bean plant was most likely found in Yemen and northeastern Ethiopia. Coffee cultivation first expanded in the Arab world. Coffee drinking originated in Sufi monasteries in Yemen in the mid-15th century.
Coffee futures contract trading is conducted through the New York Board of Trade. One coffee futures contract gives you control of 37,500 pounds of coffee. This means that each 1 cent move is equal to $375.00. This is an incredible lever that is a double-edged sword. To trade one coffee futures contract, you will need approximately $4,000.00 in your trading account for initial margin. This article is about how to make good profits from coffee trading.
There are many different strategies, methods and techniques in market trading. This includes stock and futures markets. Two important keys to successful trading are putting as many factors in your favor as possible before taking a position in the market and implementing sound money management. When trading coffee or other commodities or stocks, keep any losses small and manageable.
The strategy I implemented in 2002 was very successful. It includes elements such as trend analysis, pattern recognition, historical price level analysis, seasonal analysis, monetary standards and sound money management.
The most important element of my trading plan is implementing proper technical analysis. On the daily chart you can see a nice, steady saucer pattern that developed in July and August 2002.
Next, we looked at a historical perspective on coffee trading price levels. In fact, it was at about 50 cents, a 30-year low. This was great. The downside potential was very limited and the upside potential was very high.
Coffee usually reaches its seasonal low from July to August. This too is a positive thing. It's generally not a good idea to go against seasonal trends. At this time, the critical basis was also positive. This means that the spot price of coffee is higher than the futures price. Coffee trading is like any other trading. You want to make as many odds in your favor as possible.
At the end of August I bought 3 coffee futures contracts at around 51. I set a stop loss at 45 for 3 contracts. In this way, you have preset your maximum loss if the market moves in the opposite direction. This is proper money management, which is essential to successful trading.
In September the price rose to 55. At this point I raised my stop loss to 51. Now you will at least break even on the three coffee futures no matter what happens. This is a great position to be in when trading and is a powerful money management technique. In the end, I closed the coffee futures contract at around 69 on December 3rd. The total profit was just over $20,000. With proper hierarchy, the total profit would have been much higher. Coffee trading definitely has the potential to make you money. It's a matter of implementing a successful trading plan and proper trading psychology.
