How Big The Risk You Take In CPO Futures?

In reply to a CPO Futures reader, the futures trading that starts with a certain initial margin, as stated in the Bursa Derivatives Exchange circular, is actually not enough for technical trend traders to trade comfortably. The leverage is considered very high and technical trend traders may encounter difficulty to maintain the same positions especially after hitting multiple losing trades in a non-trending market as a start.

For example, initial margin for CPO Futures is RM4,500.00 at the moment and if a technical trend trader is started with multiple losing trades without first generating a good round of profit, the technical trend trader will keep getting margin calls from broker. These will seriously affect the psychology of trading even though the trader may have money to top up the deposit.

At a price of 2800 today, the CPO Futures per contract is actually worth RM70,000.00 and I believe not many traders will trade only ONE contract with RM70,000.00 in the trading account. If you are trading 10 contracts in your futures account, you are carrying a risk of RM700,000.00. 

Therefore, imagine that if you are losing 1% against the close previous trading day, you lose 28 ticks per contract or 280 ticks on your 10 contracts; or, to be exact... you are losing 1% of the RM700,000.00 or equivalent to RM7,000.00. 

Do you really see the kind of risk you are taking now! It is also like you are buying RM700,000.00 value of stocks in equity market and you do not have RM700,000.00 to pick up the stocks that you may have bought. How will you feel on the 1% down? Be serious to yourself if you are trading futures as a novice trader.

  

Wilmar Pressure On Sarawak Oil Palm

Wilmar had said it planned to stop buying CPO produced from oil palm trees planted in forest areas and peat swamp land in Sarawak from 2016.

The analysts, quoted in The Star, said 72% of 1.6million ha of peat swamp in Sarawak were planted with oil palm trees while The Edge Malaysia according to Bernama saying 90607.3ha of the 1.6million ha planted with oil palm trees. So, whose figures is right?

Wilmar is not the only buyer but is the biggest buyer in Sarawak, 10 over years in there taking 45% of the CPO produced by 41 mills in the state. 

I like this quote..."If we are not allowed to plant in those two areas, then there will be no oil palm planted in Sarawak," Masing was quoted as saying. "We have no areas where there are no forest... if you want to plant oil palm where there is no forest, you will have to go to the Sahara Desert because there is no forest there." 

Wilmar, however, rejected the report. "It is not true that Wilmar will no longer buy palm oil from Sarawak," Wilmar told mongabay.com via email. 

Read more HERE at mongabay.com since it provided a very good article for CPO Futures trading general knowledge.

The Invisible Hands In FBM KLCI

Here is the excerpt from a news:

...With regard to the top 100 stocks on Bursa Malaysia, MIDF Research believes that investors should stay on the sidelines for the time being. 

 "The FTSE Bursa Malaysia KLCI's 30 component stocks may be supported by 'invisible hands' to ensure that the index stays above 1,800 points. However, the remaining 70 biggest-capitalised stocks are heading for the danger zone." ...

Is palm oil futures having "invisible hands" too? Yes, for sure, as the size of an order does affect the spike of cpo futures prices in short period of time; however, long term trends will be very hard to be manipulated. Read more long term technical trend indicators and you will believe it as big boys also follow trends, not against trends. 

Source: Foreign funds continuing selling mode http://www.btimes.com.my/Current_News/BTIMES/articles/20140210234059/Article/index_html#ixzz2syObT9VT