CL Redux
- Thread starter schizo
- Start date
I believe it's key to have good plans. Every trade I had done on that particular stock over the previous couple months had been profitable and I had insane disaster stops and very small profit targets. That's the thing about counter-trend trading based on opinion instead of price action; it can really work well, until that trade comes along that hits the disaster stop and wipes out a good chunk of the month's profits.
If you have a good trading plan then I believe it makes sense to stick with it. But now we have to define "good". My trading plan includes certain options. For instance one of my rules is to not take less than 20 ticks profit on a trade that moves in my favor, but if a reversal signal appears, I can stop-and-reverse for less than 20 ticks profit. I rarely do this, but sometimes it makes sense, so why let the trade run all the way back to break even and miss out on the prime entry point in the other direction if it's indicated?
My personal opinion is that a good trading plan has a positive reward:risk ratio. But I realize that there are reversion-to-mean strategies that have a negative ratio, but a very high win rate, so that would also be a good plan as long as there IS a plan.
Thanks for sharing that. And I'm certainly not saying the idea is to have no plan and just wing it.
I guess I'm saying too is you have to make sure you have a "good" plan that will work and won't burn you if you're wrong. And just having a hunch or some conviction on where the market is headed next isn't really a "plan". That may be what gets you into the trade to begin with, but then what? What will you do if it goes your way? Where will you take a profit? Will you close out all of your position if you have more than one contract? What will you do if it goes against you? Where will you cut your losses? You need a plan not only to maximize profits when you are right, but also one that will minimize losses when the market moves against your position(s).Some are doing just that, but not to the front month... Contango front-next just hit $3 (5-10 times recent CL standards). Last time I saw such expectations of mean reversion was in volatility futures back at the recent market top when the front month traded in Feb 2007 at 11(0), while the next month was already at the long term mean of 18(0). Just like CL term structure now. There were no bidders, just the market maker. The mean reversion lasted less than 6 hours, +80% spot and +64% front month contract. Of course the futures implied forecasts were wrong for a few months, enough to get you wiped out on the cost of carry (time decay there or contango here, same story). You have to pay for that sort of explosive upside potential, there are no free options on the buyside (sadly).
Will contango hit 10 before expiry I wonder? It feels like long gamma play already.
K.I.S.S
When do the shorts that hold for the duration take profits?
Tonight I have limits orders at the following; Buy 1 QM 85, Buy 2 more QMs 84.60, 1st and only stop at 83.80, Sell 3 QMs 86.40 with 1st scaled stop at 86.70 none after that. When I wake up we'll probably be at 85.50 and this will have just been a complete waste of time for me and whoever just read this
For long term commodity trading, I never enter with the trend. I take all trades when proper volume and trendlines match up and all entries are on new contract highs/lows and I hedge all sells with options, it is an expensive play, but it works for me, middle of January was my 4th time selling the new highs in crude. An excellent double top and to a small degree, head & shoulders which often provides for a good sized move downward. I learned long ago after numerous attempts, I don't know how far a market will go. I have broken so many rules like canceling a $300 stop to see bonds go $12,000 against me and yes, eventually became a winning trade. But if you were a guy who said I am selling Gold at $300.00 and still short, might be awhile before price returns to those levels.
I have learned, never to add to a losing position in long term trading, just doesn't test out going back twenty years for me in most other markets. Adding to a loser works for me day trading the ES, cause it is a congestive market, much more prone to snap back, Crude Oil is not this way at all. If you go to weekly charts, some swings are $15 and greater, I seldom ever see weekly pivots to hold, price just seems to blast thru them.
But it all comes down to your trading plan and hopefully it has been backtested many years and huge sample size. At some point you have to yell "uncle" if you don't.
Out with pre set limit sell , woof......