Duxon's Journal on Trading Metals

expiated

expiated

There are certainly those contributors to ET who will object to my starting yet another journal (though by now I probably have most, if not all of them on my ignore list). Even so, I'm going to go ahead and create this one anyway, given that I have found them to be invaluable in terms of blessing me with the ability to trade with consistent profitability.

The system I use to trade (Numerical Price Prediction) is designed to reflect the principles of flight dynamics, which uses the laws of physics to explain how forces act on vessels to govern their performance, stability and control to ultimately determine their velocity and attitude with respect to time. So, just as these same laws come into effect whether a pilot is flying an Airbus A380, a Britten-Norman Islander, or Robert H. Starr's Bumble Bee II; a trader using NPP will apply the same dynamics whether trading foreign currency pairs, index futures, commodities or cryptocurrencies.

Nonetheless, each of these asset classes will display its own idiosyncrasies, and because the completion of the development of my system has led me to begin expanding its application, I need to start cataloging these differences in some kind of practical, searchable, easily accessible format; and my experience over the last seven years suggests to me that EliteTrader is, at least for me personally, the best option for such a task.

The first thing I want to note is that when it comes to silver, I need to be prepared to see 15-minute price action range by as little as 0.07% deviation or as much as 0.20% deviation, and under more extreme conditions, up to 0.50% deviation.

As for when I should expect to see candlesticks regressing toward the mean/displaying mean reversion, that would be at the 0.40% to 0.70% deviation levels, or even 1.00% to 1.50% deviation under more extreme conditions, with respect to the two-hour baseline.
 
However, when it comes to trading gold, you're typically not looking for 15-minute price action to range beyond 0.07% deviation, or 0.30% under more volatile conditions. Once you're beyond this level, you'll probably be into the 0.40%, 0.70% or 1.20% deviation level of the two-hour measure(s) anyway.
 
Note: The following statements are questionable at best (seeing as how they are written based on observations made with regard to price action viewed over a relatively short period of time—only the last few days).

Natural gas' intraday price flow tends to forge a path defined by a 40-minute Channel at 0.60% deviation; with candlesticks at times venturing out to 1.00%, but typically displaying great hesitancy to go (much) beyond 1.40% (for long), and only under the most extreme conditions.

On the other hand, the same 40-minute measure finds itself lagging behind oils' intraday price flow, with the 30-minute envelope at 0.30% deviation doing a decidedly better job of tracking its progress.

Not only that, but candlesticks virtually never stray beyond the 0.50% deviation level, even when volatility and fluidity are at their highest. And even then, hardly ever do they do so for more than five or ten minutes tops.

Now, returning to natural gas, it can get active at any time, but normally not until 9 PM at night to 1 AM or 2 AM in the morning PST. It typically dies down shortly before noon and might become active again as early as 7 PM. But again, as already stated, this usually doesn’t happen until after midnight.

As a general rule, candlesticks will not violate the contrarian side of a sloping 40-minute price range envelope unless the intraday trend is reversing direction, which makes the contrarian side of the channel’s sloping baseline a relatively decent benchmark for gauging where to enter positions, and the contrarian/opposite band at 0.60% deviation a great signpost for estimating where to set stops.

With regard to oil, probably the best time to enter a position is when there is a consensus opinion (agreement) among the 30-, 15- and 10-minute measures that the asset has just initiated a reversal in the intraday trend; with the second best opportunities occurring when the three-minute price flow is coming out of temporary pullbacks behind one or more of these three slower measures.

Oil is typically most active from around 8 at night PST to noon (or the closing bell) the next day.
 
expiated said:
Note: The following statements are questionable at best (seeing as how they are written based on observations made with regard to price action viewed over a relatively short period of time—only the last few days).

Natural gas' intraday price flow tends to forge a path defined by a 40-minute Channel at 0.60% deviation; with candlesticks at times venturing out to 1.00%, but typically displaying great hesitancy to go (much) beyond 1.40% (for long), and only under the most extreme conditions.

On the other hand, the same 40-minute measure finds itself lagging behind oils' intraday price flow, with the 30-minute envelope at 0.30% deviation doing a decidedly better job of tracking its progress.

Not only that, but candlesticks virtually never stray beyond the 0.50% deviation level, even when volatility and fluidity are at their highest. And even then, hardly ever do they do so for more than five or ten minutes tops.

Now, returning to natural gas, it can get active at any time, but normally not until 9 PM at night to 1 AM or 2 AM in the morning PST. It typically dies down shortly before noon and might become active again as early as 7 PM. But again, as already stated, this usually doesn’t happen until after midnight.

As a general rule, candlesticks will not violate the contrarian side of a sloping 40-minute price range envelope unless the intraday trend is reversing direction, which makes the contrarian side of the channel’s sloping baseline a relatively decent benchmark for gauging where to enter positions, and the contrarian/opposite band at 0.60% deviation a great signpost for estimating where to set stops.

With regard to oil, probably the best time to enter a position is when there is a consensus opinion (agreement) among the 30-, 15- and 10-minute measures that the asset has just initiated a reversal in the intraday trend; with the second best opportunities occurring when the three-minute price flow is coming out of temporary pullbacks behind one or more of these three slower measures.

Oil is typically most active from around 8 at night PST to noon (or the closing bell) the next day.
More...

It is time for you to create another Journal

Duxon's Journal on Trading Energy
 
HOW DOES GOLD COMPARE?

Like natural gas, gold too has a 40-minute flow, but unlike the fossil fuel, this measure serves more as a price range envelope than as an intraday trend—typically at the 0.15% level, though under more extreme conditions, at 0.60%.

So then, gold's more "actionable" intraday trend is tracked by the seven-minute envelope at 0.07% deviation (much faster than oil or gas) with internal fluctuations (surges and pullbacks) traced by the 15-minute temporal support/resistance channel and the three-minute envelope at 0.04% deviation.
 
The title of this thread notwithstanding, after two days of looking over these assets, I do believe that natural gas is going to be my favorite vehicle for trading, with oil coming in second. Also, last night the former's price action picked up at around 10 PM PST, with the latter doing the same just before 11:00.
 
NATURAL GAS

Having come up with three different variants of natural gas hourly charts—the "Possible" version, the "Trend Line" version and the "Daily Projection" version—what thoughts do you have now that you've hand the chance to look them over carefully?

If I number them one, two and three respectively, the daily measure on chart three at 9% deviation really only comes into play if and when the asset begins trending sharply. The more practical measures are the eight-hour price range envelope at 3% deviation and the four-hour price flow channel at 2% deviation.

On the other hand, the second chart's 16-hour price range envelope at 5% deviation in tandem with the eight-hour measure at 0.5% deviation appears to estimate the limit to which natural gas might surge on any given day, with pullbacks to the contrarian side of a trending 16-hour baseline seems to quite often identify the day’s high or low, depending on the direction of the daily flow.

So then, how about you try adding the third chart’s eight-hour price range envelope at 3% deviation and four-hour price flow channel at 2% deviation onto the second chart and see if they aren’t able to all work together?

All three charts would recommend using the two-hour price flow to convey the general overall direction of the intraday price flow (even though it does suffer from a touch of lag) given that the hourly trend is a tad bit unstable, which can at times deceive an observer as to where price is ultimately or eventually going.

I eliminated (or deleted) a number of trend lines from the first chart when it became clear that the the 11- and 16-hour moving averages were the two that best tracked the day-to-day trajectory, with the four- and six-hour measures confirming or questioning whether the two-hour price flow was truly to be trusted in terms of where the intraday trend might ultimately/eventually headed.
 
expiated said:
HOW DOES GOLD COMPARE?

Like natural gas, gold too has a 40-minute flow, but unlike the fossil fuel, this measure serves more as a price range envelope than as an intraday trend—typically at the 0.15% level, though under more extreme conditions, at 0.60%. So then, gold's more "actionable" intraday trend is tracked by the seven-minute envelope at 0.07% deviation (much faster than oil or gas) with internal fluctuations (surges and pullbacks) traced by the 15-minute temporal support/resistance channel and the three-minute envelope at 0.04% deviation.
More...

Gold appears to have a (nasty) habit of making wild swings that it cannot sustain. So though price might deviate from the hourly baseline by as much as 0.25% or even 0.50% (and possibly beyond on extremely rare occasions), it will often return to levels at or below 0.07% before the end of the hour, and certainly to 0.25% (IF it went beyond that "limit").

Also, when the hourly price flow is flat, price tends to turn back at the 0.10% deviation level of the 15-minute channel, or 0.20% at the max; and likewise at the 0.10% deviation level of the 60-minute measure, or 0.20%, or 0.30% max (at least temporarily).

However, these hourly and 15-minute limits don't work (don't apply) if the hourly (and two-hour) price flows are trending, even in the slightest. So then, at that point it is necessary to transition to a 16-hour measure—the 16-hour "core" at 0.35% deviation—or 0.70% deviation under more extreme conditions. But, understand that, once the 16-hour baseline (as represented buy the lower panel histogram) is above 0.732 or below -0.732, all bets are off. If prices wishes to surge under these conditions, there might be absolutely nothing to hold it back.

(Above 0.70% deviation, price action gets REALLY radical!)

MORE RECENT NOTES:

Given that 15-minute price action evidences much too much fluctuation, wisdom recommends waiting for the two hour measure to begin sloping in a clear manner, and then trade when the 15-minute price flow is in sync, heading in that same direction...exiting positions when this is no longer the case.

Also, it looks to make sense to enter positions when the ten minute flow breaks out of the hourly "core" at 0.10% deviation (but I don't yet know how this jibes, if at all, with what was stated earlier about having the two-hour measure dictate when and when not to trade).

Keep in mind however that the trend is not likely to break out much beyond the 16-hour core at 0.35% deviation (depending on the situation). Also, the absolute maximum profit (support/resistance) for the day is likely to be found somewhere around the 0.73% deviation level of the hourly price range envelope. (But as already stated, when the 16-hour price flow evidences a radical trend, "all bets are off.")
 
OIL

Oil's intraday trend is suggested by the seven to ten minute price flows, as confirmed by 15-minute measures. Of course, it's likely that the best time to enter positions is when these measures are reversing direction, though it might be prudent to wait until the slope of the 15-minute baseline, as represented by the corresponding lower panel histogram, is above 0.238 or below -0.238.

After that, pullbacks to the contrarian band of the seven-minute price range envelope at 0.20% deviation look like the second best option, or if price action suggests this is not likely to happen, pullbacks to the contrarian side of the 15-minute support/resistance channel is the next best bet.

Supposing none of these options seems likely, pullbacks to the appropriate band on the three-minute price flow channel at 0.04% deviation constitutes the final hope. But, choosing this option is probably not very wise. (Best to wait until the next available defensible opportunity.)

Most of the time, the 15-minute price range envelope at 0.40% deviation defines the maximum rate at which oil can advance, with temporary pullbacks often taking place here unless the asset opts to "ride" this "statistical" support/resistance level; and the same can be said for the 40-minute price range envelope at 0.65% deviation from a broader/longer-range perspective.
 
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