2020 will go down as a pretty volatile year for the markets, and one that also produced good profits for many advisors who employ a trend following strategy in their trading.
We saw incredible moves in crude oil this year, reminiscent of 2008. However, this year’s moves have been even more impressive on a percentage basis. Never did I think I’d see crude oil trade below $10 again as it did briefly in April.
The trouble is, these moves came with substantial volatility, making it more difficult to book large profits.
Ultimately, I have to label the spectacular down trend in crude oil early in 2020 as the second best trend of the year.
Another significant move occurred in Silver futures after the bounce from the March lows.
Once it became clear the Fed was going all in on monetary easing, traders and investors began to pile into the silver market.
This drove the market to seven year highs before the trend fizzled out in August.
The issue with silver, as is usually the case, is that the trend ended violently, so most trend followers were left exiting positions well below the highs.
Another impressive trend from 2020, that is still ongoing, is in the Copper futures.
Similar to Silver, Copper bottomed out in March and just kept going up from there, with a few corrections.
A couple corrections in August and then October shook out the medium term trend followers, but still offered opportunity to get back in to bet another piece.
Not many people trade lumber futures due to the lack of liquidity in that market, along with the volatility. It’s one of those markets that, as you can see in the chart below, can be prone to locked limit moves… dangerous to any trader.
However, it is worth a mention due to the spectacular move it made over the Spring and Summer.
Ok, so now, on to the best trend of the year.
For me, there are a few criteria that need to be met to make this the best trend of 2020.
First, the initial breakout had to be one that was too obvious to miss. In other words, there needed to be good structure on the chart.
Second, the volatility needed to stay reasonable for most of the move.
And lastly, the trend needed to be smooth.
And the market that met that criteria? Soybeans. The uptrend in this market really got going in August, and is still ongoing. Soybeans are now trading it their highest level since 2014.
So, as you can see, 2020 has been a pretty good year for the futures markets.
I have no idea whether this will continue, but it’s clear that monetary and fiscal policy will be quite accommodative in the foreseeable future. That should be of benefit to the futures markets.
Thanks for reading!
The risk of loss in trading commodity futures contracts can be substantial. You should, therefore, carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.