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Dinerotrader

Oil Trading

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Here is a position I am still holding. Stop is at breakeven. I've never held anything past RTH close. Overall trend is up so I am not very optimistic. I'll actually have to wake up during the night to check on it if I am still in it tonight.

 

attachment.php?attachmentid=20441&stc=1&d=1270064178

 

attachment.php?attachmentid=20442&stc=1&d=1270064178

 

I'm having a tough time seeing where you're in from.

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I'm having a tough time seeing where you're in from.

 

I'm short at 83.73. You should be able to see the red line on on the chart showing my position. Chart is probably too distorted. Sorry

 

Stop has been moved to 83.41. Not sure I want to be in this position during the 1 hour period of no trading.

Edited by Dinerotrader

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do you have a target?

 

No. Just trying to ride it a bit. Like I said I never play outside RTH so this is a new deal for me. Stop is currently at 83.32. 83.10 providing some big resistance today so I will surprised if it breaks. And as I type, I stopped out at 83.32. That was a fun ride. You are a brave man Jon, for holding those positions overnight. Not sure I could sleep.

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Sometimes I don't sleep so well. Sometimes I sleep like a baby and I wake up and suddenly realize I don't know what the trade did haha.

 

83.10 is pretty good S today. I'm watching the 83.79 potential double top area, thinking maybe even a buy stop at 83.88ish. Then again I've been sucking lately so..

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The monthly roll over of oil is a recurring annoyance. I hate having to switch over every month. Also, the normal momentum behind price swings dies out a little during the few days that there is a large volume split between the current and future contracts as seen on Wednesday and Thursday last week. Do a quick morning check to compare the volumes on the contracts like Brownsfan said and you'll get the heads up when you need to switch.

This is the easy, and most reliable way, especially if you are using OEC. Just plot the current front month and the next month and watch for when the volume changes.

 

Since OEC, for example, has a field with the contract expiration date, you should never be caught unaware anyway. It's your responsibility to know this information as it is freely published by the exchanges too. Brokers like Transact won't allow you to trade the contract after first notice day anyway, and they'll summarily exit your position for you in any event.

 

And, if you monitor the ICE contracts for WTI, Brent crude and European gasoil, you should get an additional insight into when and where the trading volumes are changing.

 

I trust most of you are trading the June CLM contract month now, right? If not, you certainly should be on Monday.

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it takes all of 2 seconds to glance at the volume and see which month to trade. As of this moment May has trade volume 203431 and June has 299717. yesterday was the first day I noticed June with more volume than May and they were pretty close - you could have safely trader either. Today there is almost a 100k difference. Pretty obvious where this is going.

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This is the easy, and most reliable way, especially if you are using OEC. Just plot the current front month and the next month and watch for when the volume changes.

 

We alread hashed this out in prior posts on this thread in more detail than necessary.

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I have an idea - and it's game changing so hang on --

 

If you trade the contract w/ the highest volume, you can never go wrong.

 

A quick glance at your platform can tell you in a matter of seconds, at most 1 minute.

 

So to end this once and for all, I propose that if you simply watch volume and trade the contract w/ the highest volume, you will always be trading the best contract available at that time.

 

Please remember to say thanks for this Earth shattering post.

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Ok, here is my take if anyone cares. I think it is essential to be aware of and in control of all aspects of your trading. This includes knowing the last trading day/ first notice day of all the products you trade. Especially if you hold overnights on a swing or long term basis.

This information is freely available on the exchange websites. Relying on volume or your broker alone is a dangerous game, in my opinion. Although it can be a useful indicator, if you are already aware of the fn/lt day.

 

Ultimately, it is up to you what you decide to do. You should think about what has been written and see if it makes sense for you. Just trying to give you something to think about.

 

Best of luck

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Ok, here is my take if anyone cares. I think it is essential to be aware of and in control of all aspects of your trading. This includes knowing the last trading day/ first notice day of all the products you trade. Especially if you hold overnights on a swing or long term basis.

This information is freely available on the exchange websites. Relying on volume or your broker alone is a dangerous game, in my opinion. Although it can be a useful indicator, if you are already aware of the fn/lt day.

 

Ultimately, it is up to you what you decide to do. You should think about what has been written and see if it makes sense for you. Just trying to give you something to think about.

 

Best of luck

 

Agreed.

 

It is silly how many traders (newbies and pikers alike) don't know the specs of the contracts they are trading, nor do they know how to find out.

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That was one fast sell off in the final minutes of oil today. Here is the 5 minute chart for the past 3 days. Morning gap fill was pretty textbook it seemed because of the strong S/R at 83.43 which helped pull price there and then send it on its way.

 

attachment.php?attachmentid=20691&stc=1&d=1271807120

5aa70ffb1ffb2_4-20-201012.thumb.png.567805069349a0dfda2792a2ee6f4b31.png

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For those that trade oil, what types of strategies do you find most beneficial? I mostly trade reversals based on S/R, 123 setups, and lately been trying to work some trendlines into what I do. My usual problem is that some days I am raking it in and others, I get chopped to death with the small ranges. Overall, I am mostly working on getting my entry signals limited to 3-6 per day and upping my win rate on those. I started using a fixed stop loss of 12 ticks to limit my intervention in each trade and that has appeared to be good for me thus far.

 

I think EnochBenjamin has a thread in the Candlestick section of TL explaining how he watches for tweezer and shooting star candle formations which breakout of the VWAP.

 

I thought it would be good to get some general strategy ideas from those trading oil to include in this thread.

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Filters are what I find important in trading oil. There are so many signals and if you take them all you will lose!

 

Trendlines

I think trendlines are very important in avoiding the chop in oil. Wait for the candle to close below the trendline if you want to be conservative. A really good way to construct trendlines with oil is to connect higher low fractals for up trendlines. More on fractals later.

 

Time of Day

From 10:30 - 12:15/12:30 CST illogical moves happen on low volume. Avoid trading this time of day. Don't worry about the periodic days when big moves happen during this time - they are tricky. Between 12:30 and 1:15 a strong move in one direction will occur almost EVERY day. more often than not it is EOD profit taking and will be counter to the days move. It will start slow and be violent and fast towards the end.

 

Support & Resistance

S&R are critical to getting low risk entries. VWAP/Standard Deviation, Pivot Points, Yesterdays high, low, close. Look for confluence of multiple levels coupled with a trendline break for breakouts and look for a shooting star into the same levels for fade moves.

 

Position Size

If you want to catch a big move in oil it is best you use multiple contracts and take profit on 1 at a predetermined price so that you can lower your risk on the runner. For example, if you trade 2 contracts with say an 8¢ stop. Take profit on 1 contract at 10 ticks (fairly easy if you entry is good). Now you essential are playing with the houses money on the second contract - even if stopped out you are up $20. So let that baby run to the next logical turning point (pivot, SD, VWAP, whatever). Utilizing this method will keep your losses small while allowing you some nice winners - often with 5,8, 13:1 ratios.

 

Money Management

If you want to trade oil for the long run you better be disciplined about knowing when its not your day and quitting! Have a daily loss limit and stick with it! Make sure the daily loss limit is smaller than your average winning day. I repeat quit when you hit this number! Also have a value that once hit - the worse you can do is break even. For example if you book $500 at any point in the day - make sure you never go below zero. You can make money quick in oil but you can lose it quicker. Another way of dealing with this is quitting after 3 losing trades in any session. In oil more as with any other market I have traded disciplined money management is the key to staying alive. Oil is more volitile than most markets so the tendancy to overtrade is greater and thus the possibility of losing big increases.

 

Be careful, be disciplined and oil will be good to you. Just remember to repeat before every trade "the market pays you to be disciplined!"

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Time of Day

From 10:30 - 12:15/12:30 CST illogical moves happen on low volume. Avoid trading this time of day. Don't worry about the periodic days when big moves happen during this time - they are tricky. Between 12:30 and 1:15 a strong move in one direction will occur almost EVERY day. more often than not it is EOD profit taking and will be counter to the days move. It will start slow and be violent and fast towards the end.

 

It's interesting you say avoid the first 2 hours and I try to be done by then.

 

Beauty is in the eye's of the beholder but IMO to not trade when oil is really moving can be a detrimental rule to have in place.

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It's interesting you say avoid the first 2 hours and I try to be done by then.

 

Beauty is in the eye's of the beholder but IMO to not trade when oil is really moving can be a detrimental rule to have in place.

 

Brownsfan - I think you misunderstand what I said - I agree that if you can finish during the first 2.5 hours it is in your best interest. I am stating to avoid the middle 2 hrs of oils pit session - from 10:30 - 12:30 central standard time. The oil pit has been open since 8am CST giving you a good 2.5 hrs to make hay.

 

For me personally I always try to finish by 10:30 am CST.

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I think trendlines are very important in avoiding the chop in oil. Wait for the candle to close below the trendline if you want to be conservative. A really good way to construct trendlines with oil is to connect higher low fractals for up trendlines. More on fractals later.

 

The tease on fractals has me a waitin...appreciated the wisdom on this post. Oil has made it to my screens - have been too chickensh** to trade it as of yet. Will continue to be a voyeur - but am curious to your method of connecting higher low fractals (how low of a time pattern do you go which you have found to be reliable)

 

Thanks

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I think trendlines are very important in avoiding the chop in oil. Wait for the candle to close below the trendline if you want to be conservative. A really good way to construct trendlines with oil is to connect higher low fractals for up trendlines. More on fractals later.

 

The tease on fractals has me a waitin...appreciated the wisdom on this post. Oil has made it to my screens - have been too chickensh** to trade it as of yet. Will continue to be a voyeur - but am curious to your method of connecting higher low fractals (how low of a time pattern do you go which you have found to be reliable)

 

Thanks

 

Sorry! Didn't mean to tease. I normally only short CL and there have not been great entries (I've been trading gold until I like my setups in CL). I've attached a chart from 4/13 that shows a simple trendline formed from connecting 2 fractal points. If I was trading this setup I would wait for the break - then wait for the most recent fractal high to be breached by 1 or more tick to enter. The filter I would use is just a 21 period EMA. Hope this benefits someone.

 

Note: I have this chart set up next to a chart with VWAP/SD/Pivots and ideally would take the trade if it coincided with another s&r level.

5aa70ffb70183_FractalExample.png.19c6ae1044c1ae13798433a54287e89f.png

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