Beginners Guide to Trading QM

[suby 10]

Hey guys,

 

Have been thinking about starting to trade 1 contract of QM lately and was wondering if I could get some thoughts and opinions on how to get started...

 

So far I have noticed that there is a bit of slippage on QM as opposed to CL due to the decrease in contracts traded.

 

Was wondering if I could get some tips/pointers from the pros on here who currently trade

QM and more or less get a discussion going to Oil Trading...

 

Cheers!

[henryduncan12 10]

Hi suby, if you are new trader then go through to forex article section. Articles I hope, it may be helpful for you.

[suby 10]

Hi suby, if you are new trader then go through to forex article section. Articles I hope, it may be helpful for you.

 

Hey henryduncan12,

 

I appreciate that link. I wouldn't exactly consider myself an absolutely new trader (probably on the verge of rookie).

 

I have come to the realization that I want to focus on solely oil and in doing so I want to start with the Mini.

 

I thought I could get some advice/feedback on this

 

I.e. when trading oil futures do you use a blend of fundamental and technical analysis? or solely Technical Analysis?

 

what indicators do you use ?

 

Have you had any experience with QM? If so what kind of pointers could you give. So far I see that the volume and slippage are two completely different things when comparing QM to CL...

[suby 10]

In addition,

 

Do you base your trades off of CL's Chart when executing QM or solely on QM's chart?

 

What kind of Time Frame do you use? (3 charts 1 min, 5min and 10?)

 

I apologize if you don't even trade QM but replying to my question I am assuming you do

 

Any advice is appreciated!

[henryduncan12 10]

I am basically Forex trader so I don't have more info about Trading QM. However I want to share something related with my trading.

 

1. I use both fundamental and technical analysis

2. I use 5 min, 30 min and 1 hour time frame.

[eqsys 10]

The slippage for the QM is about $10-25 per market order per contract - fairly standard for this size futures contract. If you have backtested trading strategies for QM and know your profit/drawdown ratios - in other words, your reward/risk potential, and you can afford to lose money when you get big drawdown, then go ahead and trade. But, if you haven't done your homework, and don't know how much your strategies will lose during the tough times, then you will surely be sorry you ever thought about doing this.

 

If you want to trade oil why not trade the oil ETFs? They are a lot safer and easier to trade. Trading the various oil futures contract are for the serious traders with years of experience.

 

Just some advice from the school of "hard knocks"...

 

Best of luck to you..

[bwebber 10]

In addition,

 

Do you base your trades off of CL's Chart when executing QM or solely on QM's chart?

 

What kind of Time Frame do you use? (3 charts 1 min, 5min and 10?)

 

I apologize if you don't even trade QM but replying to my question I am assuming you do

 

Any advice is appreciated!

 

FWIW, I've been trading QM for a couple of months. I developed a strategy on the CL, but decided to run it on the QM for a bit until I was more confident with the strategy. This strategy holds for a few days at a time so the increased bid-ask spread is not too significant. The QM may not be very good for daytrading due to the low volume and increased spread though. For my purposes the QM is following the CL close enough to give identical trade signals.

[YertleTurtle 10]

You probably won't listen to me but you should not trade Oil Futures as a relative beginner. Oil and Gold are probably the two toughest markets to trade. I would suggest trading foreign exchange because a couple of the pairs are nice to trade (AUD/USD for example) and because you can trade real money but micro lots. Also - the spread scales so your position size isn't more costly if you trade smaller.

 

Even though I don't know you I will say this - you have a lot more to learn. You don't have an approach to trading, you don't know whether you are a technical or fundamental trader. You probably have little understanding of market structure and price action. I'm not trying to insult you - I just want to tell you that without a clear trading plan, a lot of experience watching markets and success paper trading (or trading small) - you might as well go to Vegas.

 

Remember - the number one rule of trading is - preserve your capital. If you have your heart set on trading oil then trading QM will help to slow the bleeding. I wouldn't trade under 15 minute charts because the slippage will be brutal.

 

Personally I trade oil off of an hourly chart. I don't use multiple timeframes, I don't use indicators and I don't look at fundamentals. I'm sure I'm in the minority but I'm profitable.

[windsurfer 10]

I agree with Yertle.

 

I also trade the CL and CL options along with a number of other products, generally using the same system.

 

If you don't have enough $ to trade the CL, you shouldn't trade the QM.

 

If you don't know the product's characteristics (e.g. inventory report), you shouldn't trade the QM.

 

If you can't afford large adverse moves on news and rumors, you shouldn't trade the QM.

 

If you don't know how to hedge your positions, such as with options, you shouldn't trade the QM.

 

The CL is not a game for novices :helloooo:

[addchild 10]

QM is only 1/2 the size of CL, Its not worth sacrificing the liquidity for the decreased leverage unless you are swing trading.

 

choosing an instrument to trade is all about finding what fits your personality, no market is easier to beat than any other. They all have unique attributes and risk tolerances.

 

That being said I find the things that drive oil prices to be fairly well defined.

 

Keep an eye on either the dollar index or the euro, as they are very correlated with movement in Oil, keep an eye on bonds and notes as well because they are essentially the other end of the market (risk off).

 

 

The key to oil is that you will get beat up at first, so start in simulation. Learn the habits and patterns of the markets. The best way to do that is just sit and watch, dont trade, don't try and guess which way it will go, just sit learn and take notes (mental or physical) of what you see. Eventually it will all start to come together.

[estrader21 10]

I also would suggest skipping out on QM. While the bid/offer may be "the standard", it is a larger chunk of your profit / contract. That spread is far more volatile than CL and furthermore, it does not track CL tick for tick IMO, meaning even if CL price hits your level, QM may not. If you have confidence in your strategy, sim trade CL for at least a month or until you feel comfortable and then trade that. CL is dangerous, but far easier for me to trade than ES.

[eqsys 10]

Last year I tested all of my best technical systems on all of the various futures contracts. The CL and QM did not test particularly well compared with many others. My conclusion was that one has to have a combination of great technical skills and fundamental knowledge of the oil market in order to be successful trading it. I do not and will not trade either contract because I get much better results with other things.

 

My goal as a trader is to make a profit, so I look for things to trade that backtest well. As the oil market doesn't test well for me I won't trade it.

 

If you want to make money I recommend trading Apple Computer from the long side - the momentum is strongly on your side with Apple and it tests extremely well with any system I throw at it.

[suby 10]

The slippage for the QM is about $10-25 per market order per contract - fairly standard for this size futures contract. If you have backtested trading strategies for QM and know your profit/drawdown ratios - in other words, your reward/risk potential, and you can afford to lose money when you get big drawdown, then go ahead and trade. But, if you haven't done your homework, and don't know how much your strategies will lose during the tough times, then you will surely be sorry you ever thought about doing this.

 

If you want to trade oil why not trade the oil ETFs? They are a lot safer and easier to trade. Trading the various oil futures contract are for the serious traders with years of experience.

 

Just some advice from the school of "hard knocks"...

 

Best of luck to you..

 

Hey eqsys,

 

Thanks for the reply. Its official that I will not touch QM but rather will trade CL.

 

I don't see the point in trading oil ETFS. There not the best instruments to daytrade in my opinion unless your account is 25000+. In addition, if you can't day trading something like USO then you'd have to settle for swing trades that last for a few days and would encounter time decay.

 

I don't plan on trading CL until I feel extremely comfortable in sim trading - However, are there any tips that you could provide someone who is looking to attack something like CL?

[suby 10]

You probably won't listen to me but you should not trade Oil Futures as a relative beginner. Oil and Gold are probably the two toughest markets to trade. I would suggest trading foreign exchange because a couple of the pairs are nice to trade (AUD/USD for example) and because you can trade real money but micro lots. Also - the spread scales so your position size isn't more costly if you trade smaller.

 

Even though I don't know you I will say this - you have a lot more to learn. You don't have an approach to trading, you don't know whether you are a technical or fundamental trader. You probably have little understanding of market structure and price action. I'm not trying to insult you - I just want to tell you that without a clear trading plan, a lot of experience watching markets and success paper trading (or trading small) - you might as well go to Vegas.

 

Remember - the number one rule of trading is - preserve your capital. If you have your heart set on trading oil then trading QM will help to slow the bleeding. I wouldn't trade under 15 minute charts because the slippage will be brutal.

 

Personally I trade oil off of an hourly chart. I don't use multiple timeframes, I don't use indicators and I don't look at fundamentals. I'm sure I'm in the minority but I'm profitable.

 

Hey YertleTurtle,

 

I appreciate the detailed advice. You haven't insulted me but I would like to tell you a bit about myself so you don't have the wrong impression. By no means can I call my self a trader yet. I am still in the learning phases; however, with that being said, its not like I just learned about trading yesterday. I have been around the markets for the past 4 years, only recently have I decided to jump into futures trading. I plan to trade 95% technically with the remainder being my fundamental analysis on the oil market. For the past month and a half all I have been doing in regards to preparing myself for this task is developing my trading plan

 

There are a few things as a newbie I would like to ask you on:

 

-How would you define the market structure for oil?

 

-What is your primary technical methodology in trading CL?

 

-Is a 10-20cent stop adequate for some setups in CL or is that asking for it due to how fast it moves,,,?

 

-I don't understand how you could trade oil off the hourly... Could you please elaborate on that?

 

I understand that you are a price action trader to the Tee. I am all ears and willing to take notes to learn. As you have a plethora of experience in this, I would appreciate any tips/advice you could give someone like myself who is looking at getting starting in trading oil futures.

 

Many Thanks,

 

Suby

[suby 10]

QM is only 1/2 the size of CL, Its not worth sacrificing the liquidity for the decreased leverage unless you are swing trading.

 

choosing an instrument to trade is all about finding what fits your personality, no market is easier to beat than any other. They all have unique attributes and risk tolerances.

 

That being said I find the things that drive oil prices to be fairly well defined.

 

Keep an eye on either the dollar index or the euro, as they are very correlated with movement in Oil, keep an eye on bonds and notes as well because they are essentially the other end of the market (risk off).

 

 

The key to oil is that you will get beat up at first, so start in simulation. Learn the habits and patterns of the markets. The best way to do that is just sit and watch, dont trade, don't try and guess which way it will go, just sit learn and take notes (mental or physical) of what you see. Eventually it will all start to come together.

 

Addchild,

 

I really appreciate this!

[YertleTurtle 10]

Hey YertleTurtle,

 

-How would you define the market structure for oil?

 

-What is your primary technical methodology in trading CL?

 

-Is a 20 cent stop adequate for some setups in CL or is that asking for it due to how fast it moves,,,?

 

-I don't understand how you could trade oil off the hourly... Could you please elaborate on that?

 

I understand that you are a price action trader to the Tee. I am all ears and willing to take notes to learn. As you have a plethora of experience in this, I would appreciate any tips/advice you could give someone like myself who is looking at getting starting in trading oil futures.

 

Many Thanks,

 

Suby

 

Market structure is a difficult subject to give a brief overview of so I'm not sure how to answer this question.

 

I primarily am a median line trader. If you want to learn more about median lines you should go to marketgeometry.com. This made a huge difference in my trading although it took a lot of work. Basically median lines (if used correctly) are a leading indicator. They can be drawn way before channels and there are statistical probabilities associated with their use. I have attached my current hourly chart of oil with just my current lines. If it makes some intuitive sense to you you may want to study them in more detail and I would be happy to answer any questions you have about them.

 

20 cents stops may work in oil. 10 cents is likely too small given the volatility. It depends on the timeframe you trade. Off an hourly chart I often take trades in the 50 cents range. In my opinion stops should be placed in a logical place - not a fixed distance. Targets should be at least 3 times the stop with a reasonable expectation of being reached. Median lines allow the user to frame risk/reward more clearly than other methodologies I have come across.

 

Any market can be traded on nearly any time frame. The market is fractal in nature. Volatility is a factor but a trader can scalp on a 5 minute chart or trade weekly charts. Again - in my opinion - after a trader has established that he can consistently make money - he should never risk more than 2% on any one trade. This can help determine what timeframe you can afford. Sometimes a trader will only be able to afford very small timeframes but won't have the ability to trade them. This is why I like forex for newer traders. There is plenty of liquidity and volatility and a trader can figure out what time frame suits his personal disposition.

 

I guess my question to you would be - why oil? Is the object of trading to make money or to prove yourself? What is it about oil that makes you think this particular market gives you an edge? As a technical trader - my only criteria is that a market is moving. There are forex pairs that strongly correlate with oil.

 

I said it before but the number one rule of trading is to preserve your capital. I personally believe that a trader has to earn size. I also believe there are certain markets a trader must earn. Oil falls into that category for me.

Edited August 29, 2012 by YertleTurtle

[obradovicmilica 10]

Hello, I am a new trader can i go through to forex article section. What can be helpful for me