Wednesday, June 27, 2007

Being Long and Short

More by accident today I discovered an interesting way to trade oil. Actually it's Light Sweet Crude I'm talking about.

Light Sweet Crude is traded with good volume on NYMEX and on IPE. The contracts are actually identical. Meaning they show no spread to one another. The spread may be at times 0.01 or 0.02 because an Nymex the Ask is hit while on IPE the Bid trades. But otherwise both contracts usually show even identical Bid and Ask prices.

Current frontmonth contracts are

CL Q7 on NYMEX and WTI Q7 on IPE

Let's say you have a tradeplan which allows for bigger swings to avoid unneccessary Stops. I regularily read Phil Flynn's Energy report and noticed him taking usually 50 to 100 tick Stops and averaging into his trades. 50 to 100 ticks is quite huge and you earnestly can ask yourself whether there really is no countertrend to exploit before the initial trade works out. Now you could take your trade at the signal and add at -30 with your stop at -50. This quite often works in oil. But as I found out today a much more interesting way to trade is

1. Take a Long CL Q7 when you get your Long Signal on your long term chart

2. If it works fine, if not take a Short WTI Q7 the moment you get the Short Signal on the shorter timeframe chart

3. Ride the Countertrend as long as it goes (and that might be farther than you thought when taking the initial position)

4. Cover your Short WTI Q7 and now add to CL Q7 or keep the WTI Q7 Short open and add to CL Q7 if you are not sure whether the Long Signal is a real one or not. Now manage both the Long and Short position. With crude ranging usually 20 to 30 ticks you might be able to squeeze out twice the points you usually get.

The reason being that psychologically you have 2 positions. One profitable, the other at a loss. And you will notice that you see these 2 positions quite differently, even when you know, that these 2 positions are in the same contract and you have to look at the sum of both positions to know whether you are in a profit or loss.

Friday, June 22, 2007


Dumb trades, you admit them to the journal and move on

very dumb trades, we all do them, it takes longer to get them behind you, but you get it all right

really really dumb trades, well I told the chat room about it and I write about it here, because I hope next time my internal Account Protection Team takes care of the really really dumb trade before it becomes one.

Here is the emotional protocol of a very very dumb trade

- 2.380 USD + 2.240 USD = -140 USD or Wrong + Hope = You lucky bastard

Long 69.51 CL (Light sweet crude)

Add one at 69.21 (after it has tested that level twice)

Average Long at 69.36

Leaving the screen as I can no longer watch the madness


Down to 68.28 -108 or - 2.160 USD

Up to 69.18 USD


Hope takes will go the remaining 18 ticks to BE and beyond into the close

Sell-off into the close 68.65

- 71 or -1.420 USD


After the pit closed it sold further, but held 68.50

I will hold it overnight

Researching Nigeria Newspapers..maybe the strike will still affect the oil industry

5 hours sleep ... Asia did nothing

5:30am CL around 68.60

ticking up, but 68.65 is a barrier and Europe starts selling oil


68.36...68.25 my account starts screaming

UNCLE point is near, where is enough enough?

Looking at a 60min chart


looking at daily charts, at weekly and monthly charts

Globetrader_03 Globetrader_04 Globetrader_05

Support is far below 67.50

That's no help, I can't hold it to the daily support, even if trading there will not change anything in the current uptrend picture

I know I got it very very wrong and I have to stop the bleeding

Stop Limit 68.20

Stop limit is not executed as CL jumps over 68.20 and trades 68.18

COIL seems to hold daily 34ema


Remove the Stoporder and put it at 68.15

68.17 trades -119 or -2.380 USD

COIL ticks up CL follows suit and we trade 68.25, .36, .57

Lucky idiot

CL trades down to 68.40, 68.36 SHIT SHIT SHIT


Holding and reverse

Stop Market at 68.15, I leave the screen and get something to eat

It's going up

68.90 -54 man am I glad I got not squeezed out

69.14 69.00 68.98

the phone rings

69.07 69.13 we have strong upward momentum

69.21, 69.31, 69.29 and holding

Stop 1 at 69.27 hit

69.17 69.22 69.30 69.36

Stop 69.31

69.39 69.35 Stop hit 69.31


All out 69.29 average

-2.380 +2.240 = -140

Yes I know...Don't tell me about Stoplosses, don't tell me about being dumb, about not following my plan, about violationg all the rules I have, about discipline


I thought writing about the emotions going through my head will help me recognize the ingredients leading to such idiotic behaviour

I had a green day before this trade, but I've had quite a lot of stopped trades this week, where the market proved my initial signal right after I got stopped at breakeven + 1 tick.

So I was in that I'm ultimately right mood

I had actually made no trade for the last 2 hours and missed a few nice signals already

It was late in the day around 4:45 pm my time when i took the trade, it was hot and I was tired.

I was sure oil would make another run at 70$ (Error No.1)

The signal to take the trade was there, but it just did not work out. I mused about the long and entered a bit late at 69.51 instead of 69.44

I noticed the resistance at 69.55, but thought it would be taken out. 2 tests failed and I did not exit the trade at breakeven (Error No.2)

I hesitated adding to the trade at 69.21. The market traded 69.20 and reversed to 69.42, it did it again and only then I commited myself to the add-on (Error No.3)

The market did not trade at 69.21 this day again. Instead we broke lower.

At 69.15 I was red for the day and was sorry about the profits gone on a dumb trade (Error No.4)

Strong sell-off and I did not Reverse the trade even if I saw more selling coming (Error No.5)

I got a chance to exit at 69.00 after the recovery high was in at 69.18.28 and a new lower high was made yesterday evening at 69.07


This morning it was only hope and being very very lucky (a bit being stubborn may have helped as well)

Oh yes, I will work on myself to transfer some of that resilence to cover to my profitable trades and I'm sure I will do very good with them

This time I was lucky

I have my share of trades where I wasn't lucky

Maybe writing about this trade helps me to identify the ingredients of impending disaster before it strikes

Have a great weekend