Setting Sell Targets and Sticking With Them

What Happened

Have you ever said you will sell if the market reaches a certain level, then didn’t follow through? You are not alone. It is easy to wish for a higher price and tell yourself what you are going to do. Without a pre-planned strategy, however, you are unlikely to follow though. Why? You are human, which means you digest information. While your instinct may nag you to sell when prices reach your target, you are also processing the rationale as to why the market is rallying, and this usually trumps your original thoughts.  

Are you lacking discipline? Maybe. Is it a good idea to change your original thoughts and not make sales you said you would? Maybe. The point is, when prices rally, so often does emotion. It is likely you experienced regret when the original plan to sell was abandoned. As sure as the sun comes up, the price rally ends. Before long, the market is at the same spot (or lower) than prices were when you set your target.

Why This Is Important

As production capability has improved over time, so has the market’s confidence in supply availability. The belief you have in yourself as well as the technology behind production reliability should be reminders that, when the market runs out of reasons to rally, sellers are ready. Markets can pivot from bullish to bearish overnight. Once a decline begins, it is often at a pace much faster than when prices were rallying. The old saying “stairs up and elevator down” describes the rapid descent prices can make.

What Can You Do?

Recognizing your emotions can get in the way of strategic planning is important. It is easy to say, “I need to be more disciplined.” Yet, a lack of strategy is often a barrier to discipline. Start by asking yourself: If prices reach my target, can I follow through? If you can’t answer that with an emphatic yes, a different approach may be needed. A good strategy starts with placing sell orders, using the tools that best suit your operation. That could be cash, hedge-to-arrive, or futures contracts.  

If placing sell orders is too rigid or you find it isn’t for you, discuss setting target points with your advisor. If the target is hit, have them call and remind you that your targets have been triggered and it may be time to act. If at that time you don’t like the idea of selling, you can at least explore setting a price floor. Discussing it with a professional can provide guidance. One idea may be using puts.  

The bottom line is to have dialogue. Whatever the approach, remind yourself change may be needed. Having a strategic approach is likely to prove more productive than a “wish” approach.

Find What Works for You

Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation rather than emotionally charged responses to market moves, which are always dynamic. 

Editor’s Note: If you have any questions on this Perspective, feel free to contact Bryan Doherty at Total Farm Marketing: (800) 334-9779.

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy, or discipline will guarantee success or profits. Any decisions you may make to buy, sell, or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of the National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.