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Dinerotrader

Oil Trading

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It has come to my realization many times that I learn things better when I force my mind to put thoughts into the written word. I have thought about starting an oil thread for quite a while but never did. So here were go.

 

My hope is that this will be a good place for those that trade oil to exchange thoughts and ideas about historical analysis, tomorrow’s expectations, news events,etc. Brownsfan has a great post here which goes through some of the basic facts about trading oil but I’ll do a quick version to help the thread stand on its own.

 

attachment.php?attachmentid=20081&stc=1&d=1268771784

 

Light Sweet Crude Oil Futures Info

 

NYMEX Contract symbol: CL

Open ECry margin requirement: ~$2,700

Pit open: 9:00 am EST

Pit Close: 2:30 pm EST

Tick Value: The trades in increments of $0.01 which represents $10 per tick per contract traded. Nice and easy.

 

Monthly Contract rollover:

The CL contract rolls each month. I keep a quotes screen up that has the current month and the next 2 months in advance with the total volume info listed so that when the next month’s contract starts trading with higher volume than the current month, I rollover. Here is the month lettering for rollover:

 

attachment.php?attachmentid=20076&stc=1&d=1268770261

 

Weekly Inventory (EIA Petroleum Status Report):

Each week The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S., whether produced here or abroad. It normally comes out every Wednesday at 10:30 EST but there are several times during the year when it is moved to another day due to holidays and such. Do not hold trades through this or execute trades into this report until you have experience. Historically, price volatility is more narrow from pit open to the time of this report so I make my profit targets very small if I am going to trade at all on Wednesday morning.

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Here is a historical look at the CL over the past years.

 

attachment.php?attachmentid=20074&stc=1&d=1268770261

 

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Historical S/R provides surprisingly consistent reactions from price. Here are the major levels I keep on my chart.

 

attachment.php?attachmentid=20075&stc=1&d=1268770261

 

The main purpose of this thread is to help those trading oil make more money trading oil through useful exchange of ideas and information. This is not my personal trading log.

5aa70fe8e87e4_3-16-201003.png.c4ce1d95d342cf33a8f50984e9cc1d32.png

5aa70fe8efe68_3-16-201004.thumb.png.c7246f1521447df42f749448de71f6a5.png

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5aa70fe918d49_3-16-201006.png.4766a0e2ee97e48571e819f1f6b25de1.png

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Thoughts on tomorrow.

We were at this same level on Wednesday last week when oil came out and we got a huge up and down move. The pink area noted below can be pretty choppy especially on a Wednesday before inventory so I might sit out the trades until inventory comes out. We'll see how the price action looks.

 

attachment.php?attachmentid=20083&stc=1&d=1268774777

5aa70fe91dfa9_3-16-201009.png.bf81c6fde5f9c40afd30a5511f64b5d4.png

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Cool thread. Since I'm taking my CL trades live now I thought I'd chime in.

 

Here my longer term chart. I was looking for longs down at 79.40ish. I got a stop order in but it never filled. The level bent too much for me and I didn't catch the move up.

 

I'm now hoping for a pullback to 80.76ish, or a short near 83.04 OR an upside breakout about 83.04.

 

20100317-keiwnmyjtd5g77ed3f2n4mj4et.preview.jpg

Click for full size - Uploaded with plasq's Skitch

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Oil is currently split in it's volume as rollover approaches. It's also providing some very tight trading yesterday and today.

 

Trading these tight ranges can be difficult, so tread cautiously when you see the volume being split between contracts. Oil rolls monthly and since it's not as big a market as say the ES, when 50% are trading 1 contract and 50% the other, it can be difficult to get sustaining moves IMO.

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  brownsfan019 said:
Oil is currently split in it's volume as rollover approaches. It's also providing some very tight trading yesterday and today.

 

Trading these tight ranges can be difficult, so tread cautiously when you see the volume being split between contracts. Oil rolls monthly and since it's not as big a market as say the ES, when 50% are trading 1 contract and 50% the other, it can be difficult to get sustaining moves IMO.

 

Good points BF. Here is how the volume ended up today between the J,K, and M contracts. I am hoping to not change over to the K contract until Monday so I can redo all my charts over the weekend.

 

attachment.php?attachmentid=20162&stc=1&d=1268942059

5aa70feb8da54_3-18-201009.png.09d833950f4c6abffdfbb3fedfedac7c.png

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  Dinerotrader said:
Good points BF. Here is how the volume ended up today between the J,K, and M contracts. I am hoping to not change over to the K contract until Monday so I can redo all my charts over the weekend.

 

attachment.php?attachmentid=20162&stc=1&d=1268942059

 

Had to switch to the K contract this morning.

 

attachment.php?attachmentid=20187&stc=1&d=1269005818

5aa70fec457d2_3-19-201001.png.0b5ba9462a3793e12e7c671a68b4c2ef.png

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  brownsfan019 said:
Are you on the K contract JB? B/c this is great today - awesome volume and awesome moves.

 

attachment.php?attachmentid=20232&stc=1&d=1269276333

 

I'm on the 4/10 contract. Dangit, why is the 5/10 all of the sudden so much better? The vol has been fine on this contract all the other days, it's weird. Isn't this the front month?

Edited by jonbig04

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  jonbig04 said:
I'm on the 4/10 contract. Dangit, why is the 5/10 all of the sudden so much better? The vol has been fine on this contract all the other days, it's weird. Isn't this the front month?

 

Everyone switched to the K contract on Friday. Did you see my post above?

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  Dinerotrader said:
Everyone switched to the K contract on Friday. Did you see my post above?

 

yea, I thought people were switching from the March to the April, not from the April to the May. What the heck.

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  jonbig04 said:
I wish it were that simple, but yea I'll get it figured out. :cool:

 

How is it not simple?

 

Create quote window/workspace with CL contracts - as you saw what I did.

Check it daily.

Trade contract w/ the biggest number.

 

As Dinero pointed out, rollover was occurring last week. If you didn't realize that, then you probably shouldn't be trading this until you understand what contract to be trading.

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  jonbig04 said:
So is it safe to say the majority of the volume will be on the K contract rather than the J? Or does it just depend on the day?

 

I am no expert but I have never seen a day where the volume on the next oil contract in line was larger than the prior on one day and then switch back to having lower volume than the prior. It seems like once the volume switches to the next contract, that is where the larger volume stays.

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  brownsfan019 said:
How is it not simple?

 

Create quote window/workspace with CL contracts - as you saw what I did.

Check it daily.

Trade contract w/ the biggest number.

 

I suppose I could do that if the volume is going to flip flop between contracts. If not, there is really no point, I'll just stick with the new one. The reason it's not so simple for me is just because m y setups usually take a few days to fully play out. It just means I'll have to have separate workspaces for each contract which is no big deal.

 

  brownsfan019 said:
As Dinero pointed out, rollover was occurring last week. If you didn't realize that, then you probably shouldn't be trading this until you understand what contract to be trading.

 

Why not? It's obviously pretty easy to see when your watching the wrong contract lol.

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  Dinerotrader said:
I am no expert but I have never seen a day where the volume on the next oil contract in line was larger than the prior on one day and then switch back to having lower volume than the prior. It seems like once the volume switches to the next contract, that is where the larger volume stays.

 

Cool. I was a month behind. I was trading the March while everyone else was trading the April. When everyone rolled over, so did I...to the older contract haha. Stupid. Easy fix though.

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