Trading Sugar Futures

If you’ve ever thought about trading sugar futures or about learning the sugar market in general, let me tell you that there’s plenty of profits to be made in sugar, but you have to understand the factors that drive price, and you have to understand where the price of sugar is in the overall scheme of its price history. This is the only way to really determine (at any time) whether or not sugar is a “bargain”, or whether you’re entering in near the top range of sugar’s historical price. The only way to accurately ascertain this type of information is by studying sugar’s historical price charts, which are available on a myriad of websites out there today, one of the first coming to mind being BarChart.com (one of my personal favorites). But before I get too far ahead of myself, let me back up and basically “introduce” sugar futures to anyone who may not be fully familiar with this particular commodity’s specifications. Sugar trades on the ICE (Intercontinental Exchange), and its contract symbol is SB. It’s actually called Sugar # 11, and although I have been trading since 2001, I still don’t know what the “11” stands for. According to ICE’s own website, Sugar # 11 is “the world’s benchmark contract for raw sugar trading”. Basically, whatever happens in Sugar #11 trading will trickle down to the lesser-talked-about sugar derivatives. One contract of Sugar # 11 represents 112,000 pounds of sugar—a whale of a lot of sweetness.

The price of sugar is quoted in hundredths of a cent per pound, with one hundredth of a cent equaling $11.20. What this means is that if sugar’s price goes from 9.35 to 9.36, you have just gained $11.20 if you were long (or lost $11.20 if you were short). Sugar is considered to be in the “Softs” category of commodities, along with cotton, orange juice, coffee, etc. What you have to remember is that no matter what type of commodity you’re trading, there’s a great degree of risk that comes along with the leverage that futures trading affords. You can learn how to manage that risk and make huge profits from the markets, or you can be ignorant, or arrogant, or uninformed, or emotional, or whatever else does not equate to sound trading practices, and you will see your trading account decimated in what will seem like the blink of an eye. The futures market has humbled many a man (and woman) who felt that he/she was financially invincible. The sugar market is no different…you have to learn how to manage your downside risk by using reasonable protective stop-loss orders once you’ve put on a position, by making sure that you are not under-capitalized when trying to trade sugar futures, and by even possibly using options for protection. Some people believe that using an option for protection is a waste of money, but I look at it as an “insurance contract” in case the market does not move in your favor. Every solid and profitable trader understands that losses are a part of the game, so in my mind I always go back to the famous saying I once heard: “If you learn how to manage the downside, the upside will take care of itself”. Trading sugar futures is no different than trading any other commodity in that respect; you can actually trade practically any market successfully if you learn how to practice solid overall trading principles. Discipline, non-emotionalism, and a sound money management strategy can take you a long way in the markets, so be sure to really do your homework before entering the fray of the futures market.