November 3

Lean Hogs Futures Trading Strategy?

Last Updated on 3 November, 2022 by Samuelsson

Many new to trading tend to only look at markets they are familiar with. Most often, that happens to be the index markets and not, for example, lean hogs futures. That’s a pity since there are other markets that offer great opportunities to diversify!

In general, you want to diversify as much as you possibly can so that one market or one strategy isn’t responsible for all your profits. The more markets and strategies you trade, the better prepared you are for market turmoil and black swan events. To be frank, there simply is no reason to stay with one market, when there are so many to choose from!

One great market that is often overlooked, is the lean hogs futures market. It holds many edges that are worth investigating for your trading. However, the subject of this post is another. The lean hogs futures market has experienced great swings lately, and I thought that it might be interesting to understand why!

In many cases, it’s hard to ascribe price action to certain events, but this time there is one reason that seems to have triggered it all.

What Has Happened?

Take a look at this daily chart of the lean hogs futures market:

Chart showing the lean hogs futures market in daily bars
Lean hogs futures chart

As you can see, the price has rocketed since the beginning of March, going from slightly below 70$ all the way up to 98$. That’s an increase of over 40%, in just one month! So what’s driving this market?

Well, China, that stands for nearly 50% of the world production of pork meat, has had to make its biggest purchase of  US pork meat in nearly two years. The reason is that a massive outbreak of African swine fever has reduced Chinese pork production by as much as 30%, creating a shortfall that needs to be compensated through more imports. China already is a massive buyer of American meat products and consumed nearly half of worldwide pork production in 2018.

The approaching trade deals between China and the U.S could determine the extent of the Chinese increase in meat imports, thus impacting the price of lean hogs. In other words, this is something worth keeping an eye on!

Profiting From Lean Hogs Rally

All major price movements of any market offer great opportunities to make substantial profits or losses. If you have a robust strategy, you might end up on the winning side and make some gains. Here is one strategy of mine that has been very successful in the recent lean hogs rally:

A lean hogs strategy applied on a chart
Lean Hogs strategy

As you see, lean hogs futures managed to catch a significant extent of the last month’s swings. First, it followed the market all the way up to the top, exited the market, and managed to reenter right when it was about to turn up again. In the picture below you can see how the last two trades made a significant mark on the equity curve.


An Equity curve of a strategy traded on the lean hogs market
Strategy report

Of course, this strategy was lucky and managed to be on the right side of the market. That’s not always the case. Nonetheless, having a good strategy increases your odds of making money from volatility explosions like this one!

Final Words

There are many markets that hold nice opportunities for traders to make money, and the lean hogs futures market is one of them. Many new traders focus too much on their favorite markets and subsequently miss many chances to diversify and achieve higher returns with lower risk. Don’t be one of them! Trade as many markets as you can, and you will most likely achieve better results! Diversification is the closest we can ever come to “the holy grail” in trading!

Here is our archive with articles about other tradeable futures markets.


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