Tuesday, August 05, 2008


Here is how I see the oil market unfolding


It's a daily continuous CL chart and I have added a Trendline fan. As you can see 2 trendlines have been broken to the downside with the next Trendline coming into play at 110 and then the last one going back about 2 years at 87.

As you can see the upmove had as first target (green line labelled T) 115 and as second target 145, which was tested to the upside, but then proved the correct target for the upmove.

Now let's look at the upmove itself. We have retraced more than 33% and are about to test the 50% retracement level at 116.50. That corresponds loosely with the first target of the upswing at 115.40.
A bit below you find the Volume weighted longterm MA (240WMA) which might add support as well.

That means I see the 116-114 area as a strong support area for oil, with the 110 level as second support below, as that level corresponds with a 62% retracement level from the top.

Add to that reports at CNBC that with gasoline below 4$ demand is coming back into the market, I see a bottoming process starting in oil at the 115 level with 110 as eventual spike low.

I usually don't trade long term, I trade day by day. Still I like to have a view on the market. I like to know what longer term traders see in a market I trade. And maybe I will manage to trade longer term myself.

Monday, August 04, 2008

Trading coaches

2 years ago I met a very gifted trader and she agreed to teach me. I learned a lot during the time, I blew it later not due to her fault, but because the trading plan was not suited to my style of trading. It just wasn’t my edge in the markets. The trading plan worked then and it works today. I could even trade it today, but it still wouldn’t be my plan and I wouldn’t feel comfortable trading it. A few days ago I had the following discussion with David

[09:24] (croc): there is upside pressure on oil this morning

[09:25] (croc): but it's early, so expect range trading for the time being with higher lows


[09:27] (croc): 124.20 -124 is a good support this morning, 125.30 needs to be taken out for any move upward having legs


[09:31] (david_uk): morning croc, do you no longer display those 'volume profiles' on your charts?

[09:33] (croc): no, I can now see them without displaying them, so it's just clutter on the chart

[09:34] (david_uk): what do you mean? Do you mean that you can visualise the poc ?

[09:36] (croc): the poc is not really important as it does not act as Support/resistance but as a point around which prices swing. The 66% volume lines are a lot more important, but these you see as well without having the lines shown on the chart

[09:37] (croc): thing is, you need to have clear charts. The less you have on a chart the more it can tell you

[09:37] (david_uk): you can 'see' them or you can visualise (imagine) where they would be?

[09:39] (croc): I look at a chart and can tell you where the current POC and the 66% volume lines should be. Call it as you will, I have removed them from the chart, as they are no longer necessary for my trading

[09:40] (david_uk): ok understood

[09:40] (croc): It's the same reason why I have no oscillator (STO, CCI, RSI) on my charts

[[09:40] (croc): I know what level these oscillators have approximatly when I look at a price chart, so I don't need them on the chart

[09:41] (croc): I used to trade divergence on these oscillators, and I see that divergence when I look at the pricechart only, so I don't need to display the oscillators

[09:43] (croc): If I add a cci on that 10 tick chart I showed earlier, you will see higher lows on the cci and a long at that last 124.25 where I had a small long arrow placed on the chart

[09:43] (croc): so why do I need a cci, if I see it on the chart itself?


[09:47] (croc): or do you need a volume/price histogram to tell you that 124.85 is a short term support? (marked on the chart)


[09:48] (croc): add to that that gold is trading at the daily highs, HO and RB are trading up and you have a low risk long trade

Be prepared that any method you learn from a teacher will fail, if you can't make it your own method.

It doesn’t mean you are not suited as trader, it doesn’t mean you can’t make it or that a good teacher will not bring you forward. Any teacher, who shares his/her method with you and explains it, so you can understand it, will bring you forward regardless what trading style you will later adopt as your own trading style.

A trading coach might bring you a huge step forward, but he can’t force you to drink. Only if you understand why the method works, will you be able to profit. And then it must still be a method within your comfort zone. Meaning the risk taken must

Trading PA means you have to let go of a lot of precious thingies like oscillators or arcane indicators. You don’t need them, but first you need to trust yourself that you can walk without them. And believe me it’s difficult to let them go, to accept that they are not a way to finding the holy grail. And be prepared to lose first and make it back later. We look for security in an unsecure business, where the trade which looks riskiest actually is the safest trade available, while the trade which looks 100% sure is the one which no longer works, where you go long 1 tick below the top or short one tick above the low of the day. And you will sit there unable to take the next trades asking yourself, why always me, why do I always get the short end of the stick. Of course the next signals would have paid for the one loss and when you are ready to take the next trade the market is ripe to go again against the 100% sure signal giving you the next loss.

I have found my edge, my own interpretation of price action. I have losses as everyone else, but I trust myself now and know I will trade it back. I just need to continue trading my plan because price action works. I still sometimes struggle, but I get better and I don’t need 20 trades a day. I don’t need to trade a market, if I have no feeling for it, I trade the markets which look like they will suit my trading plan today. If I make 4 or 5 trades per day and get my 70 to 100 ticks per day I’m more than content at the moment. Rome wasn’t built in a day. No need to take higher risks by adding contracts if you are not ready for that risk. I always have a small grin on my face, when I see brokerages advertising low margin rates. It might be nice to trade oil with a 500$ margin, but that would have thrown me out of the game long ago. At the moment I apply an internal 10500$ margin per contract traded. So I don’t care about margins really, because my money management plan won’t allow me to make use of lower rates anyway. The associated risks are just too high. Before anything else you need to keep your account safe, so you can trade the other day. And overleveraging is the sure way to the broke house.