I am starting to scalp the crack spread with the exchange contract RBECLE (CQG). Any scalpers/traders here.. i know we can swing trade this but thats not what i am looking at.. i am having a few issues
a) My charts not matching the DOM (using CQG)..
- i usually have a volume chart for my other trades but does not work at all..any suggestions?
- Usually bid/ask is pretty thick but this animal seems very strange.. bids/offers all over at all different depths and not continuous.. so cant really tell order flow easily
b) Bid/ask is sometimes 2 to 3 ticks.. sometimes 5 ticks wide.. so are we just placing limit orders? intead of hitting bid/offer?
c) Any technicals more suited to this type of scalping?? i use cumulative delta for my other trading but this does not seem to fit
Note: I am not a member and thus commissions do eat up but still looking to hold to the next VWAP band so not just a few ticks but more like 15-20
thoughts/opinions are welcome..
Here's the ones from the ice exchange, just replace the codes. (QP = Gasoil. QO = Brent Crude oil.)
a) The CQG Codes:
The 4:3 Crack spread ratio on CQG is:
QP-7.458*QO
The 1:1 Crack spread ratio is:
QP-10*QO
You are heavier on the Oil, hence why the multiplier on QO is higher than the 4:3 (near dv01) ratio.
I can see what you're trying to do. Trying to be a s1ck kunt with volume reading on a
super highly competitive commodity spread will give you more pain than glory. If you're referring to a Volume Profile chart, I don't think they can be done for spreads on CQG.
Also,
there is no price-action reading game in these spreads. They are over-run by HFTs. Our brains (reaction time 30ms-100ms) can't compete on their nanosecond levels.
The exchanges
love to suck off HFTs. They ruined everything. Don't play that game you will just hurt your account and your confidence.
It's clear what you want to do...
You want to trade a spread (less volatility than an outright) but you want to use the price-action game to do it. This is a dead-end game because it's extremely inefficient. There are HFT/algos which are in every
outright product you're spreading and they're beating you individually in each contract.
Now that you know this, read;
1. If you want to trade a spread (like the 1:1 crack), you need to do some chart-testing and analysis yourself, or even look for leads/lags in other indices, other commodities... to see if you can find a pattern. Unfortunately I can't give away any edge here because you need to research it yourself.
2. If you want to trade volume... price-action... "bids and offers"... you can't be doing a spread. You'll need the Jigsaw platform or at least the Market-Profile / Volume Profile skills on CQG, and trade outright Oil (CLE) from that. Oil is much more thin than say, the Bund or T-notes, so you might find this game to be hard to learn at the start. Also, at $10 a tick you can ruin yourself pretty easily.
b) The bid/ask is of course 2-3 ticks wide. This is because for every Gasoil tick, the Oil needs to move ~3 oil ticks.
The CQG ladder showing you the spread is set to "Bid/Ask" by defaults. That means, the 'fills' you think you want to get, require you to get filled Limit on the Gasoil (thicker contract) and then hit market on the QO (thinner). The 3-tick wide gap means you are crossing the spread in both legs.
And good luck doing that, I'll say.
The exchanges suck off HFT d1ckheads so you'll be left last in queue just about every time, even if you want to do a nice and clean bid-the-spread move.
The exchanges (CME, ICE etc.) all love sucking the nobs off HFT/algo guys and never forget this! If you don't believe me, see how much you get legged on your CQG autospreader by trying to get conservative prices in the crack.
I strongly do not recommend leaving a quote in to do this without a sufficient Volume Lean (conservative amount).
But even then, when Nymex session kicks into gear, it will be like shooting crack into your eyeball with how much Oil shoots around. I've been legged 5-6 oil ticks using a conservative volume lean in that crack spread, with a
"market v market" execution.
Unfortunately, the exchanges let HFT's cheat you and they always will because they make money off volume... it's not even good enough to have a co-located autospreader server located in London, next to the exchange..
If you charts are not matching the DOM then you might need to manually put up the correct months.
e.g. QP?2-10*QO?1 will give you 2nd-contract QP and 1st-month QO.
c) Technicals for scalping the Crack-Spread...
Try putting a moving average, or Keltner, or Bollinger band... or just try a VWAP Evenlope.
Experiment with time-frame. Once again... I wish I could give you answers but we'll need someone with CQG back-testing skills to give us the optimum standard-deviation to fade for the crack-spread if we want to get anywhere. It's not enough to go off "gut feel" anymore (this isn't 2015 easy money days)
Plot it out and you'll see a sharp and distinct difference in the spread comparing London hours to Post-Nymex session open hours.
And watch out for Oil inventories. And watch out for random Saudi guys making comments on TradeTheNews... I think my Oil leg went like 100 ticks offside against me because of some random comment a few months ago and the Gasoil couldn't catch up. I had to average and hold for days.
Even after being on-top of this game, you will probably have a pitchfork sharpened because you are going to learn
how much the exchanges love sucking off the HFT's.
You will get legged everywhere so make a conservative volume lean and if you're doing bigger size, use icebergs of 1-lot minimum increments.
