Following our May 5th publication, where I shared How Commodity Hedging Works, published by The Commodity Report, I received a message requesting an example using real dollars.

This report intends to familiarize the reader with the use of the Futures to benefit from a price increase after they have sold inventory and are now in a short position.

DO NOT attempt to replicate this example and consult with your advisor before entering any positions.

There is a high probability that this trade will not be profitable.

You can use the link below to read that report.

Following today’s KC Hard Red Winter Wheat Report, I entered into two Long Futures positions using the CME Practice Simulator to demonstrate the associated cash requirements, not including brokerage fees.

I chose to use Futures for this demonstration.

The CME Practice Simulator is a great resource to practice before risking real money.

Here is the link to the referenced earlier report:

The example can apply to the following:

Using the CME Practice Simulator, I began with an account balance of $100,000.

Below are the account details:

Each contract size is 5000 bushels.

It is important to identify your Original Stop (if one is wrong) before entering the position.

Expect to be wrong and manage your position size accordingly.

My enter and exit positions are based on the above chart.

Enter Price: 1193.50

Original Stop: 1154.00

Take Profit: 1256.00

The Take Profit level was identified by the confluence of the trendline and previous closing high.

A strategy for a longer-term strategy is to stay in the position, raising the stop.

I will raise my stop when the opportunity presents itself.

My enter and exit positions are based on the above chart.

Enter Price: 1202.75

Original Stop: 1116.00

Take Profit: 11234.00