Make sure to give the CL (Crude Oil) Contract Consideration!

[brownsfan019 17]

4 months ago I started this thread on the CL. It was more of an FYI thread.

 

Since then I've traded with limited time dedicated to the CL and recently a few things came to light as I began to monitor it more closely during the day...

 

1) This thing can move. Which is great if you are like me and like to see some pretty quick results - good or bad.

 

2) At $10/tick, it doesn't take much of these movements to make some nice profits.

 

3) With volume in the 100k - 300k range, it's fairly deep for a lesser known contract.

 

 

The reason for this new thread is to bring your attention to this contract once again and at least take a look at it during the day while you are trading. Even though the ticks are less than the ES, I am finding the movements MUCH MORE SIGNIFICANT than the ES. Allow me to explain...

 

1) Today my average win was 26.3 pts and average loss was 8.88 pts. The average win equates to $260/contract. In order to make $260/contract on the ES, I would need 5.2 pts. Here's the problem - AVERAGING 5.2 pts over the day on the ES is not an easy task in my opinion. For me, on the ES, I have many profitable trades that pop for 1-3 pts approximately. So to almost double that would be difficult to say the least.

 

2) As I said, this contract will tell you pretty quick if you are right or not. I like that. I hate getting into an ES trade that can take hours to develop. With the CL, it's fairly quick.

 

3) Others have said in the other thread that CL can respect technical analysis better and I would have to agree at this point.

 

4) It is independent of the indexes and operates on it's own. If you are looking for a contract to trade that has limited correlation to an index, this could be a great fit.

 

5) Even though commissions are higher, with a larger profit target more achievable here vs. the ES, I don't consider the commissions to be a problem. Also, margins will normally be higher than $500 like the ES. Due to the volatility brokers go into protection mode. Just be aware of what your broker will charge for intraday margins before getting into a trade.

 

It's worth a look, esp if you have free data through your broker like Open ECry offers. Had it not been for this free access, I probably wouldn't have given it a look.

 

 

Before running out and trading the CL, make sure to watch it for a few days/weeks so you can really see it operates.

It can get jumpy and is not for the weak of heart.

[BlowFish 10]

Is it quite 'technical'? (Hows that for a vague term). Is it 'trendy' on intraday time frames ? I'll try and think of some more vague generic questions

 

Which exchange are you trading on? I typed in CL and 'ONE' came up.

 

Cheers.

[brownsfan019 17]

Is it quite 'technical'? (Hows that for a vague term). Is it 'trendy' on intraday time frames ? I'll try and think of some more vague generic questions

 

Which exchange are you trading on? I typed in CL and 'ONE' came up.

 

Cheers.

 

BF -

 

1) Not sure what you mean by 'quite technical'. For me, as a candlestick trader, it works well. Not sure how other technicals would handle it.

 

2) You'll find the CL either in a strong trend or very range bound. The nice thing about those ranges is that we are not talking about 1-2 pts, like we can see on the ES. You can easily take 10+ pts on a 'range bound' CL day. I think this is why I am liking it more and more - even when range bound, it is providing profits whereas the ES is not.

 

3) It is traded on the CME through a Nymex partnership - http://www.nymex.com/CL_spec.aspx

 

note - if trading on Open ECry, the symbol is GCL. Current contract is GCLF8 on the DOM.

[brownsfan019 17]

If you guys are looking for a contract that doesn't wait around and will let you know real quick if you are right or not, the CL is the place to be. So far this week the results are such that I can't even watch the ES much b/c I can't afford to miss a setup on the CL. I like quick and easy - either I am right or wrong and there's no waiting. If that suits you and your personality, the CL is one nice contract.

 

So far, 3 trades this morning at +125 pts net and working on a long position currently. 125 = $1250/CONTRACT. I would need 25 ES pts on a per contract basis to mimic that.

 

Seems to me that the risk/reward over here is far superior to that of any other futures contract, incl the big boys - ES, NQ, etc. Even though the CL could be viewed as more 'risky' b/c of the volatile moves, I would actually argue that it's less risky due to the phenomenal risk/reward ratios.

[brownsfan019 17]

Well, that long worked nicely... +148 pts on the long mentioned above.

 

You just cannot get that with ease on the ES on a per contract basis. I understand that if trading size you can, but dollar for dollar, the CL is a nice little contract to add to your arsenal. Or devote your entire trading day to it as I am seriously considering...

 

[Marsupilami 10]

If you guys are looking for a contract that doesn't wait around and will let you know real quick if you are right or not, the CL is the place to be. So far this week the results are such that I can't even watch the ES much b/c I can't afford to miss a setup on the CL. I like quick and easy - either I am right or wrong and there's no waiting. If that suits you and your personality, the CL is one nice contract.

 

So far, 3 trades this morning at +125 pts net and working on a long position currently. 125 = $1250/CONTRACT. I would need 25 ES pts on a per contract basis to mimic that.

 

Seems to me that the risk/reward over here is far superior to that of any other futures contract, incl the big boys - ES, NQ, etc. Even though the CL could be viewed as more 'risky' b/c of the volatile moves, I would actually argue that it's less risky due to the phenomenal risk/reward ratios.

 

 

Hello brownsfan,

 

I think the energy market ( Oil, NatGas) is a great place to be for profitable traders...much more interesting than most indices and currencies. However, regarding the risk/reward ratio, I'm not so sure whether oil is better than e.g. the ES.

Moves in both oil and natural gas can be so sharp and drastic that, I'm afraid, no stop loss will help if the market goes the wrong way. I know of a trader who almost lost 6k USD per 1 CL contract in one single sharp move when buses in London where bombed ( don't remember the date). He told me he did have a SL in place...I know that on the same day I was following the ES, it would have allowed you to get out of the down move with much smaller losses.

 

I personally would not want to trade CL with less than 7-8 k. These major events are rare, but they do happen, and if one made use of the low margins offered by some brokers one could go bankrupt pretty easily in a matter of seconds.

 

But nevertheless, CL is great...

 

Good trading

[brownsfan019 17]

Well, what to say. You just have to check this contract out for yourself to see if it suits you and your trading style. So far this week, every day has been a nice winner and to the point that it's challenging my ES gains and some days kicking it's butt!

 

More often than not you will have to pay an extra fee to get this data turned on (free to Open ECry customers), but I would consider turning it on for December (wait until 12/3 to avoid data charges in Nov) and see what you think. I know we had/have some ER2 traders here and I think the CL blows the ER2 out of the water in terms of profit potential.

[brownsfan019 17]

Hello brownsfan,

 

I think the energy market ( Oil, NatGas) is a great place to be for profitable traders...much more interesting than most indices and currencies. However, regarding the risk/reward ratio, I'm not so sure whether oil is better than e.g. the ES.

Moves in both oil and natural gas can be so sharp and drastic that, I'm afraid, no stop loss will help if the market goes the wrong way. I know of a trader who almost lost 6k USD per 1 CL contract in one single sharp move when buses in London where bombed ( don't remember the date). He told me he did have a SL in place...I know that on the same day I was following the ES, it would have allowed you to get out of the down move with much smaller losses.

 

I personally would not want to trade CL with less than 7-8 k. These major events are rare, but they do happen, and if one made use of the low margins offered by some brokers one could go bankrupt pretty easily in a matter of seconds.

 

But nevertheless, CL is great...

 

Good trading

 

Mars - We can make that same argument on ANY futures contract. Just ask anyone that was trading the ES, YM, NQ, etc. on Sept 11, 2001.

 

Drastic world events can punish (or make) you. By no means should anyone trade in anticipation of this, but the bottom line is - while your friend lost $6k, someone made $6k. Don't forget that other side of the coin. And if you are afraid of a worldly event effecting your trading, I suggest getting out of this biz now. Sooner or later, another bad incident will occur. Not if, but when...

 

Looking past these unforeseen and unpredictable events, the CL was a great week of trading for myself. I honestly cannot believe the points I took home this week. Today was by far the worst day of the week and net pts was 61.63 after commissions and fees. At $10/tick, not a bad day of work, but the absolute worst day this week for me.

 

In the end, I compare my results to the ES. 61.63 CL pts = 12.326 ES pts. Could I have made 12.326 ES pts today? Perhaps. But considering today was the worst day this week on the CL, the ES can't touch other days in terms of net points per contract.

 

For me, the real question right now is - do I focus 100% on the CL where I can trade less in terms of number of contracts (and much lower commission costs as a result) or trade the ES, but in much higher increments. If my goal is to equal the returns in the ES that I am seeing in the CL, the ONLY way to do that consistently is to increase the size I am trading and only compare actual net dollars.

 

Point being - I can trade less contracts on the CL, pay quite a bit less in commissions and make more money.... This would free up SO MUCH trading capital that I wouldn't know what to do with the excess cash! I can accomplish my income goals with less money tied up in a futures account that earns next to nothing when the money is sitting there...

 

Some food for thought.

 

Thanks for stopping by to the thread Mars and welcome to the board! I thought I was discussing the CL w/ myself.

[Marsupilami 10]

Hello brownsfan,

 

thank you for welcoming me "aboard". Judging from what I have read on this board so far, I think it is a very nice website. Very informative, and less negativity than on other boards.

I also like the fact that several users here are into Market Profile...which I am trying to get into more deeply.

 

Regards,

Mars

[The Bear 10]

 

Looking past these unforeseen and unpredictable events, the CL was a great week of trading for myself. I honestly cannot believe the points I took home this week. Today was by far the worst day of the week and net pts was 61.63 after commissions and fees. At $10/tick, not a bad day of work, but the absolute worst day this week for me.

 

For me, the real question right now is - do I focus 100% on the CL where I can trade less in terms of number of contracts (and much lower commission costs as a result) or trade the ES, but in much higher increments. If my goal is to equal the returns in the ES that I am seeing in the CL, the ONLY way to do that consistently is to increase the size I am trading and only compare actual net dollars.

 

Point being - I can trade less contracts on the CL, pay quite a bit less in commissions and make more money....

 

Just a word of advice Brown, don't get too excited over a week of oil trading. It's normal to have great gains in CL, but you need these to buffer the big losses you'll eventually get, and they will come sooner or later. The oil market is funny this way, you can get these huge gains but then it can evaporate quick. The swings are fast and furious but it's also great like you said if you don't like waiting.

 

What I mean is, don't look at a weeks performance too critically. I would say, compare your results after 6 months of CL trading vs the Index trading.

[The Bear 10]

Is it quite 'technical'? (Hows that for a vague term). Is it 'trendy' on intraday time frames ? I'll try and think of some more vague generic questions

 

Cheers.

 

From my experience, CL is most of the time not trendy on intra-day time frames. There are some days where you get really nice trends, good quality, and on these days gains come quick and fast, but most of the time it's pretty choppy and erratic. It's like any market, you get good days then ugly days....

[The Bear 10]

Hello brownsfan,

 

However, regarding the risk/reward ratio, I'm not so sure whether oil is better than e.g. the ES.

Moves in both oil and natural gas can be so sharp and drastic that, I'm afraid, no stop loss will help if the market goes the wrong way.

Good trading

 

In my opinion, no market is better than any other. We trade what we trade, and if we feel more comfortable in one than another - then stick with it. What you are witnessing with CL is a difference in leverage than the ES. Changes in gearing change the feel. For example if you want fast moves, then Henry Hub NG is the market for you. The leverage is high and the moves are fast even for 1 contract it carries good leverage.

 

As far as getting fleeced in the energy markets, yes, with even a single contact like NG, if something goes wrong like a technical problem, you could potentially get hurt much quicker than 1 CL contract or 1 ES contract, simply due to the gearing. The gearing is higher, so if you get a runnaway market (and it happened to me once but I minimized the pain) and your stop doesn't execute, it can get a little hairy. But nobody should even enter these commodity markets unless they are aware of these risks, and are willing to lose that kind of money.