Breaking into the markets can feel confusing. Every week, Trader PhD Ag Marketing sends broadcasts to subscribers with marketing advice for their commodities. Our goal is to help our customers understand the markets and feel confident about their marketing strategy.

Whether you’re a seasoned marketer or just getting started, here are some key terms you’ll want to know to get the most out of Trader PhD’s audio broadcasts:

Basis is the difference between the price of a physical commodity and the price of the futures contract for the same commodity. May be either negative or positive (premium).

Bearish refers to the position where one expects the price to move lower. Any factor that could cause prices to fall may be described as “bearish.”

Breakout occurs when the price moves outside of an established trading range. A confirmed breakout can either be the start of a new trend or market the end of a trend.

Bullish or a market “bull” is one who expects the price to move higher. Any factor that could cause prices to rise may be described as “bullish.”

Buyback refers to farmers or marketers buying futures contracts they first sold to hedge their position in the futures market. For example, if Chad issues a signal for a corn farmer to hedge, they will sell a futures contract that they will buy back before selling their physical commodity. 

Carry refers to a market condition in which prices of nearby futures contracts are trading at a discount to more deferred contracts. This is considered a "normal" market and can also be called contango.

Climax bottom refers to a market condition where a downtrend accelerates too rapidly, reaching an unsustainable pace. This sharp and exaggerated decline often leads to the exhaustion of selling pressure, increasing the likelihood of the market bottoming out. Unlike a gradual or rounded bottom, a climax bottom is characterized by volatile and dramatic price action, signaling a potential reversal as the market stabilizes or rebounds.

Double-dip refers to a market scenario where the prices revisit a previous low point after an initial dip. Specifically, it involves the market testing a prior low. A double-dip is seen as an opportunity for savvy traders, as it often signals potential bottoming action, with more upside opportunity than downside risk.

Failed test occurs when the price of a commodity fails to break through an established support level. When the market puts in a high or a low, the market will often “test” it. It’s kind of like putting some weight on an iced-over pond to test and see if it’s gonna hold your weight. The failure of prices unable to break higher or lower marks failed test and could signal a reversal.

Forward contract is a contract entered into by two parties who agree to the future purchase or sale of a specified commodity. This differs from a futures contract such that the participants in a forward contract are contracting directly with each other, rather than through a clearing corporation.

Futures contract is a legally binding contract to buy or sell an asset of a standardized quantity, quality, and delivery mechanism, at some point in the future, for an agreed-upon price, typically traded through an exchange.

Gap open refers to when the price of a commodity opens higher than it closed the day before, leaving a gap between the two bars on a chart. A gap open lower occurs when the market opens lower than the previous day’s close and leaves a gap on the chart.

Hedging refers to the practice of using financial instruments, such as futures or options contracts, to manage the price risk associated with selling a crop. By locking in a future price for their grain or other produce, farmers can protect themselves against adverse market price movements, ensuring more predictable income. Hedging does not eliminate all risks but provides a way to secure a minimum price while retaining some potential to benefit from favorable price movements.

Hedge-to-Arrive (HTA) contract is a type of grain marketing tool that allows farmers to lock in the futures price for their crop while leaving the basis (the difference between the local cash price and the futures price) to be set at a later date.

Inverted refers to a market condition in which the prices nearby futures contracts are trading at a premium to more deferred contracts. This typically results from a short-term supply shortage and high demand for a commodity. This is also known as backwardation.

In-sympathy refers to the price of a commodity moving in the same direction as another commodity due to shared influences. Corn and soybeans oftentimes move in sympathy with one another due to their relationship with planted acres.

Ledge refers to a tight consolidation following a sharp selloff in a market. Ledges don’t last long and end with a breakout.

Limit order is an order to buy or sell a commodity at a specific price or better. 

Liquidation is the closing out of trading positions. Typically refers to selling previously established long positions, or long liquidation. Short positions may also be liquidated for cash.

Marketing year refers to the annual cycle of buying and selling each discrete national production of a crop. The USDA considers September 1st to August 31st the marketing year for corn and soybeans, and June 1st to May 31st the marketing year for wheat. 

Market orders or at-the-market orders are the most common type of trading orders. A market order is an order to buy or sell a futures contract at whatever price is obtainable when it is entered.

Market tone refers to the overall sentiment or mood of the market, often indicated by the price action, trading volume, and participant behavior. It reflects whether the market is generally optimistic (bullish), pessimistic (bearish), or neutral, and can provide insights into trader confidence and the direction of future price movements.

New crop is a term used to describe grain trading contracts that represent the upcoming crop. For example, the new crop contract for corn is the December, while the new crop contract for soybeans is November.

Open interest is the total number of futures or options contracts that have not yet been closed out or delivered on.

Old crop is a term used to describe grain trading contracts that represent the already-past, most recent crop of grain.

Options are a risk management tool that gives producers the right but not the obligation to buy or sell a futures contract at a strike price. Some hedgers prefer options over futures contracts due to more limited price risk and the lower costs associated with options.

Overbought is a market condition when prices experience a large increase over a short time. This is considered a bearish signal.

Oversold is a market condition when prices experience a large decrease over a short time. This is considered a bullish signal.

Profit-taking refers to traders closing out long positions, which leads to selling. This is also known as long liquidation. Profit-taking can also occur when the market bears close short positions at a profit by buying futures.

Pullback in futures markets refers to a temporary decline in price within an ongoing upward trend. It occurs when the market experiences a short-term reversal or retracement, typically as a result of profit-taking, minor corrections, or shifts in market sentiment. 

Resistance levels occur when additional buying pressure in a commodity no longer benefits the price. Resistance is identified when the price of a commodity struggles to trade above a certain level. A breakout occurs if the market is able to move above the level. 

Reversal day occurs when a market posts a new high (or new low) in an uptrend (downtrend) and then reverses to the close below (above) the preceding day’s close. Additionally, the reversal is called a key reversal when the daily trading volume is above average compared to the past few sessions.

Seasonality refers to the periodical fluctuations in the distribution of spot or futures prices. This is based on supply and demand factors, including growing/production timelines and export windows.

Short-covering is another name for profit-taking when traders are buying out of their short positions. Short covering does not always occur when traders are taking profits, but shorts are also covered to limit losses when the market begins to go against a position.

Spot refers to the market in which commodities are available for immediate delivery. It also refers to the cash market price of a specific commodity. 

Squeeze is a naturally occurring phenomenon that forces traders out of a market. A short squeeze is a rapid increase in the price of a commodity that goes against freshly established short positions. This leads to short-covering to limit losses. A long squeeze is a rapid price decrease that goes against market bulls and leads to long liquidation.

Support levels occur when additional selling pressure of a commodity does not negatively affect the price at a certain price.

Trading range occurs when a futures contract trades between consistent high and low prices for a period of time; The top of a trading range often provides price resistance, while the bottom of the trading range typically offers price support. This is also known as prices trading sideways or in a consolidation pattern.

Trends can be defined as an uptrend or downtrend. An uptrend is a succession of higher highs and higher lows. Similarly, a downward trend is a succession of lower highs and lower lows. Trends can last for weeks, months, or even years. 

The WASDE (World Agricultural Supply and Demand Estimates) report is a closely-watched monthly report summarizing estimates from USDA’s Office of the Chief Economist, Agricultural Marketing Service, Farm Service Agency, Economic Research Service, and Foreign Agricultural Service, including both supply and demand categories for all major crops produced in the U.S.

Volatility is a statistical measure of the dispersion of returns for a given security or market index. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a "volatile" market. An asset's volatility is a key factor when pricing options contracts.

Volume refers to the quantity of trades made in a market at a specific time period.