Trading the trend: long Arabica coffee
Front month Arabica coffee futures have probably ended their recent consolidation phase and seem to be in the process of resuming their medium-term uptrend.
We therefore would like to go long Arabica coffee around 186 with a stop loss below the current January low at 174 and an upside target at 204.
(AI Video Summary)
Previous FTSE 100 trade outcome
In this week's "Trading in a trend" video, Axel Rudolph reflects on his past trading decisions and shares a new trade idea. Let's break it down in a way that someone with little trading experience can understand.
At the beginning of January, he made a trading decision to go short (meaning he was betting on the price to go down) on the FTSE 100 index at around 7,667 points. The index actually fell further, allowing him to potentially make a profit of about 250 points. If you haven't closed your short position yet, he suggests it might be a good time to do so because the index is supposedly on an upward move. However, the ultimate decision lies with you.
Last week's sugar futures trade outcome
Moving on to Rudolph's previous week's trade, he went short on sugar futures. He expected the price to go down after a specific pattern, but unfortunately, the trade didn't go as expected and he was stopped out (meaning the trade was automatically closed because the price went against him). This situation emphasises the importance of having a stop loss in place, which helps protect your money when trades don't go as planned.
This week's trading opportunity
Now, Rudolph introduces his trade idea for the current week: going long (betting on the price to go up) on Arabica coffee futures. He believes that the recent drop in price is just a temporary setback in an overall upward trend. He suggests buying Arabica coffee futures at around 186 points as it pulls back slightly.
To manage the risk in this trade, he recommends placing a stop loss (an order to automatically close the trade if the price reaches a certain level) below the lowest point in January, which is at 174 points. He has a target for the upward move at around 204 points.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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