Sugar Explosion
Take a look at the sugar trend for the last year:
Sugar is one of those markets that can rocket on a whim. Veteran traders will easily recall the years when markets like Sugar or Coffee or Cocoa traded substantially higher or lower - the big trends out of nowhere. Often sparked by an assortment of third world concerns, these markets have a tendency to produce large trends in a short period of time.
Look at sugar now. It has exploded to recent highs, highs not seen in more than a decade. But how could you have taken advantage of a move like this? How could you have been ready for the next world event to shoot sugar to the moon? You need to trade with rules. You need to have a system. You need to be ready, with a market like sugar on your watch list, ready to enter on breakouts as it is making new highs or lows. You have no idea when you enter if it will go to the moon, but you still need to have a method that will get you “in” to be on board so if it does rocket up - you don’t miss it.
This Sugar move is even more proof of the theorem that trend following exploits “worldwide events”. Trend followers had ample time to position in Sugar while it was trading around 8.00 - long before the market blew through 12, 14 or even 18. What technical signal would not have had you squarely into the Sugar trend?
Trend following entry into the Sugar happened long before Brazil began to emphasize more and more sugar to make more Ethanol. Or you could possibly argue that the fundamental reason for Sugar’s rally is tied to Crude Oil. However, the fundamentals didn’t matter if you were trading to take advantage of this incredible move. Sugar began moving higher long before the public knew about Brazil’s re-emphasized energy policy. Traders who waited on the fundamentals to “explain” the rationale for the Sugar trade missed the initial breakout, and the big profits that resulted.
Why do people have such a hard time just accepting the sugar trend (or any other trend) and just riding it? Why do people feel the need to explain “why” the move happened?
