To trade the Soybean Futures Market and Crude Oil Futures with the same risk, considering the Average True Range (ATR) for setting stop losses and profit targets, you can use a method that balances the different volatility and contract sizes of the two markets. Here’s how to approach it:

Steps to Calculate:

1. Determine the ATR:

   • The ATR gives you a measure of volatility. You can calculate the ATR for both Soybeans and Crude Oil over a chosen period (e.g., 14 days) or retrieve it from your charting software.

2. Determine the contract size for Soybeans and Crude Oil:

   • Soybean Futures are traded on the CME (Chicago Mercantile Exchange) and represent 5,000 bushels per contract.
   • Crude Oil Futures (WTI) are traded on the NYMEX and represent 1,000 barrels per contract.

3. Stop-Loss and Profit Target based on ATR:

   • Set your stop-loss and profit target in units of the ATR. A common approach is, for example, 1x ATR as a stop-loss and 2x ATR as a profit target (2:1 ratio).

4. Risk Adjustment:

   • You want to keep the risk in both markets equal, meaning that you use the same $ risk per trade for both markets by adjusting the position size according to the ATR.

5. Calculate the Position Size:

   • To determine the position size, use the formula:
     • {Position Size} = {Risk in $} / {ATR in $}
   • The ATR value needs to be converted into $ per contract as follows:
     • {ATR in $} = {ATR in points} * {value per point}

• • For Soybeans, the value per point is $50 (since one point = 0.01 and 5,000 bushels per contract).
  • For Crude Oil, the value per point is $1,000 (since one point = 1 and 1,000 barrels per contract).

Example:

• ATR for Soybeans: 0.25 points
  • ATR (in $) = 0.25 points × $50 = $12.50 per contract
• ATR for Crude Oil: 1.50 points
  • ATR (in $) = 1.50 points × $1,000 = $1,500 per contract

Risk per Trade (in $):

Let’s say you want to risk $500 per trade. The position sizes would be:

• Position size for Soybeans:
  500 / 12.50 = 40 contracts
  Position size for Crude Oil:
  500 / 1500 = 0.33 contracts
• Since you can’t trade fractional contracts, you’d either have to adjust your risk or reduce the position size for Soybeans.

Summary:

• Calculate the ATR for each market.
• Determine the ATR in $ per contract.
• Set your risk per trade and calculate the corresponding position size, so you trade both markets with the same risk.

It's true that the month of August has historically been associated with higher volatility in the financial markets, and this is often reflected in the VIX (Volatility Index). The VIX, often referred to as the "fear gauge," measures market expectations of near-term volatility as implied by S&P 500 index options. Higher VIX values indicate increased market uncertainty and fear, which often leads to sharp market movements.

see: https://www.cboe.com/insights/posts/inside-volatility-trading-a-day-a-week-a-year-a-decade/

August's reputation for higher VIX peaks is grounded in historical patterns of market behavior, influenced by seasonal factors, liquidity issues, and significant economic or geopolitical events. While these factors make August a potentially volatile month, understanding these dynamics can help traders better navigate the markets during this period.

Crude oil has been in backwardation (where short-term futures are priced higher than long-term futures) for years, even during price declines. Here are some reasons why this happens:

1. High Spot Market Demand: 
   • Backwardation suggests strong immediate demand for physical oil. Consumers and refineries may need oil quickly, which drives up short-term prices, even if long-term prices are lower due to expectations of stable supply.
2. Storage Costs and Deterioration:
   • Storing crude oil is expensive due to the need for safe and secure facilities. In a backwardation market, it’s less profitable to store oil because future prices are lower than current ones. This incentivizes companies to sell or use oil immediately rather than keeping it in storage.
3. Geopolitical and Supply Risks:
   • Geopolitical tensions, especially in key oil-producing regions like the Middle East, can cause short-term price spikes. These uncertainties elevate the current demand for oil, while future prices may remain lower due to expectations that the situation will eventually stabilize.
4. OPEC Supply Management:
   • The OPEC group often manages oil supply by cutting production to support prices. By limiting output, they can create temporary supply shortages, which keep short-term prices high, even in a declining market.
5. Refinery Operations and Seasonal Demand:
   • Refineries may adjust their operations seasonally, increasing demand for crude oil during specific periods (e.g., for winter heating oil). These fluctuations can drive up near-term prices, leading to backwardation, even when the overall market is declining.

In summary, backwardation persists in the crude oil market due to immediate demand, high storage costs, supply management by OPEC, and geopolitical factors, making short-term prices higher than long-term prices even during periods of falling prices.

The Commitment of Traders (COT) report is a valuable tool for traders in the futures markets, providing insights into the positions held by different types of market participants. This report, published weekly by the Commodity Futures Trading Commission (CFTC), can offer clues about market sentiment and potential price movements. In this article, we’ll dive into what COT data is, how it’s structured, and how you can use it to enhance your trading strategy.

What is COT Data?

The COT report provides a breakdown of the open interest (the total number of outstanding contracts) in futures markets, categorized by the type of trader. It typically covers various markets, including commodities, currencies, and stock indexes. The report is released every Friday and reflects the positions as of the preceding Tuesday.

Categories in the COT Report

The COT report divides traders into three main categories:

1. Commercial Traders (Hedgers): These are typically producers, merchants, processors, or end users of a commodity. They use futures markets to hedge against price risks in the physical market. For example, a grain producer might sell futures contracts to lock in a price for their crop.
2. Non-Commercial Traders (Speculators): This group includes large institutional investors, hedge funds, and other entities that trade futures to profit from price movements, rather than to hedge against price risks. They are often considered the "smart money" because of their influence and resources.
3. Non-Reportable Traders (Small Traders):These are typically individual traders or small institutions that do not hold large enough positions to be required to report them to the CFTC. This category often represents the general public or retail traders.

How to Interpret COT Data

Understanding how to interpret COT data can give you an edge in the markets. Here’s how you can break it down:

1. Analyze the Net Position: The net position is the difference between the number of long contracts (buying interest) and short contracts (selling interest) held by each group of traders. For example, if commercial traders are net short, it might indicate that they are hedging against future price declines.
2. Look for Extremes: Extreme positions can be particularly insightful. For example, if non-commercial traders hold a record number of long positions, it could signal that the market is overbought and due for a correction. Conversely, if commercial traders are extremely net long, it could indicate that prices are likely to rise, as these traders are often well-informed.
3. Watch for Divergences: Divergences between price action and COT data can also provide trading opportunities. If prices are rising, but commercial traders are increasingly going short, it could suggest that the rally is losing momentum. Conversely, if prices are falling but commercial traders are buying, it could indicate that a bottom is near.
4. Track Changes Over Time: Instead of focusing on a single report, observe how positions evolve over several weeks. A gradual buildup of long positions by commercial traders, for instance, might suggest increasing confidence in higher future prices.

Using COT Data in Your Trading Strategy

Here’s how you can incorporate COT data into your trading:

1. Contrarian Indicator: Many traders use the COT report as a contrarian indicator. Since commercial traders are often hedging, their net short positions in a rising market could indicate that prices might soon decline. Conversely, if speculators are heavily net long, the market might be overextended, and a reversal could be near.
2. Confirmation Tool: Use COT data to confirm signals from your technical or fundamental analysis. For example, if your technical analysis suggests a potential bullish breakout, and COT data shows increasing long positions by commercial traders, it could strengthen your conviction.
3. Timing Market Entries: Timing is crucial in trading, and COT data can help you better time your market entries and exits. For instance, if you see non-commercial traders beginning to reduce their long positions after a significant rally, it might be a signal to take profits or tighten your stop losses.
4. Risk Management: Understanding the positions of different market participants can also help with risk management. If COT data indicates that a market is overly crowded on one side, you might decide to reduce your position size or avoid trading that market until the imbalance corrects.Limitations of COT Data

While the COT report is a powerful tool, it does have limitations:

• Lag Time: The data is released with a delay, reflecting positions as of Tuesday but not being published until Friday.
• Not Predictive: COT data should be used as part of a broader strategy. It indicates how different traders are positioned but does not predict immediate price movements.
• Interpretation Complexity: It can be complex to interpret, especially in volatile markets where positions might change rapidly.

Conclusion

COT data offers valuable insights into the positioning and sentiment of various market participants. By understanding how to read and apply this information, you can make more informed trading decisions, identify potential market turning points, and better manage risk. While it’s not a standalone tool, when combined with technical analysis, fundamental analysis, and a solid risk management plan, COT data can be a powerful addition to your trading toolkit.