Duxon's Journal on Trading Metals

SATURDAY | MAY 18, 2024
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I just finished visually melding the charts from yesterday's longer-term views with my intraday versions, and plan to spend some time tomorrow describing in writing how they might be integrated. Nonetheless, based on little more than a superficial glance, my impression is that in the "long" run, silver should be traded in the direction of the slope of the two-day, and especially the 24-hour, trend(s). Of course, this requires that the two of them be in sync with one another.

Yet, though this should be one's ultimate intention, more practically speaking, what rules the day at any given moment, what must govern a traders decision in the immediate timeframe, is the angle of the 4½-hour baseline. Moreover, I'm not so sure that one ought to be trading until and unless the slope of this measure, as represented by the associated lower-panel histogram, is greater than 0.9874 or less than -0.9874.

Gold appears likely to lean heavily on 3 hours, 4½ hours and 21 minutes; whereas with crude oil it's six hours and 90 minutes; and with natural gas it's 1½ days and 2¼ hours.
 
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Why do traders call natural gas the widow maker?

In financial markets, a "widow maker" is a trade that results in large losses or is risky enough to do so. Natural gas futures are a common widow maker trade. This is because natural gas is volatile compared to other assets. For example, March contracts are low because of the end of winter, while April contracts are high because utilities resupply natural gas storage. If investors misjudge the spread, their investments can be wiped out.
 
SUNDAY | MAY 19, 2024

Integrating Longer-term and Intraday Perspectives:

A brief summation of my most recent observations can be made by stating that…
  1. Day trading gold depends most heavily on the 4½ -hour, three-hour and 21-minute measures.
  2. Silver relies most heavily on 4½ hours, two hours and one hour.
  3. Natural gas on 36 hours and 2¼ hours
  4. And crude oil on six hours and 1½ hours
THE FOLLOWING INITIAL SPECULATIONS WILL BE SUBJECT TO MODIFICATION AS DICTIATED BY ACTUAL OUTCOMES FOLLOWING THEIR ATTEMPTED APPLICATION…
 
With respect to gold, the five-day price flow doesn't really have a role to play at the intraday level, or even from a pseudo swing trading perspective.

So then, for maximum profit, you'd probably want to catch the beginning of a reversal in the thee-hour price range envelope at 0.40% deviation each time it comes out of a pullback from a trajectory opposed to the slope of the two-day baseline—and especially the 24-hour baseline—to resume a course in alignment with them, as confirmed by the 4½-hour moving average.

Nonetheless, profitable trades can often times also be executed when the three-hour price range envelope at 0.40% deviation initiates a reversion toward the mean (i.e., the 24-hour baseline) from the exterior of the upper or lower band of the corresponding envelope at 0.70% deviation.

So, now I need to drill down and see how 21 minutes fits into all this (and let me not forget about the ten and 51 minute measures as well).

(By the way, to pseudo position/swing trade gold, you'd want to buy when the 12-day price flow turns bullish and sell when it turns bearish. To maximize profits, stay with a given position only so long as the two-day price flow remains in sync with the 12-day price action.)

UPDATE: So then, it would seem your main interest in the ten-minute price flow channel(s) is in identifying pullbacks in the longer/slower trends, at the very least, to the contrarian band of this "ribbon" at 0.13% deviation, and more significantly, to the contrarian band of the 21-minute price range envelope at 0.16% deviation; or if the 21-minute measures themselves negotiate a pullback, then you would look to enter positions as they (and ten-minute price action) exit this maneuver.

So long as the 51-minute baseline is above the three- and four-hour measures, you're more likely to look to buy—but only so long as price action remains on the surge/advance side of the MA, and you'll be looking to sell when the opposite is true. (Exit if/when ten minute price action tries to cross back behind the 21-minute baseline.)
 
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My most recent instructions on how to trade silver were to picture in your mind a silver dollar eating a troy ounce silver candlestick chart as a visual aide to preserve in the forefront of your recollection the postulate (or axiom) that the fastest actionable price flow when it comes to this metal is the Indian red "ate-and-a-half" minute price range envelope at 0.10% deviation—which is navigated internally by the 4¼-minute price range envelope at 0.04% deviation. Of course, from there you move up to the beige (or khaki) 21-minute baseline and its corresponding "blue shadow" channel at 0.20% deviation; and then on to the olive-colored 51-minute baseline.

What you need to consider from there are the typical fluctuations. If silver is not particularly trending all that well, look to enter positions at the upper or lower band of the green 51-minute price range envelope at 0.40% deviation and/or the bold gray 21-minute price range envelope at 0.45% deviation.

My inclination now is to assign a central role to the 4½-hour baseline. (Similar to gold, silver's four-day measures have nothing to contribute to the intraday decision-making process.) If this (4½-hour) measure is sloping upward, I ultimately want to be long. If it is sloping downward, from a longer-term perspective, I want to be short. (Perhaps the ideal time to go long is when the bars in the lower-panel histograms corresponding to the slopes of the three- and four-hour baselines surpass the 1.0147 and 0.9874 levels respectively, with the opposite being true when they crawl below the corresponding negative values.)

If it is neutral, I probably want to be trading the fluctuations of the 51-, 21- and 8½ -minute price flows between the upper and lower 0.70% deviation levels of the three-hour price range envelope; or the undulations of the 8½-minute price flow between the upper and lower 0.40% deviation levels of the 51-minute (and/or the 0.45% deviation levels of the 21-minute) price range envelopes.

On the other hand, if the 51-minute baseline begins to separate itself from its 4½-hour cousin, I will be looking to enter positions as price is coming out of pullbacks to the contrarian side of the 51-minute price range envelop at 0.40% deviation (which jibes with the previous instructions).

If the asset begins trending so sharply that such pullbacks never occur, then seek to enter if and when price bounces off the contrarian band of the 21-minute price range envelope at 0.20% deviation; and if this never happens either, then do so when price is rejected by a contrarian band of one of the 8½-minute price flow channels at 0.30%, 0.20% or 0.10% deviation (depending on the strength of the trend).
 
Yes, believe it or not, the slope of natural gas' 36-hour (1½ days) measures ARE relevant in terms of deciding which direction to trade at the intraday level, and this is even more true of its 12-hour measure(s)!

Other indicators in addition to the 2¼-hour price range envelope at 1.2% deviation that might prove helpful include:
  • the nine-hour price range envelope at 5% deviation and its corresponding baseline
  • the 3½-hour price range envelope at 1.5% deviation
  • the 40-minute price flow channel at 0.30% deviation and
  • the 17-minute price range envelope at 0.70% deviation.
Because natural gas' price action is so erratic and spasmodic, it's difficult to zero in on a systematic protocol for entering positions. One possible trade setup is if and when the 2¼-hour and 3½-hour measures are coming out of pullbacks that were headed in the opposite direction of the slope of the 36-hour price flow.

Then again, if these measures maintain trajectories that match the 36-hour price flow, then probably the only other possible setup is when candlesticks are making contact with the contrarian bands of the faster (the 2¼-hour, 3½-hour, 40-minute and/or 17-minute) envelopes. This is especially true if such maneuvers result in candlestick positioning themselves on the contrarian side of the nine, 12- and/or 36-hour baselines.

(Forget previous statements about the two-day and five-day measures being important. Limit yourself to 1½-days max at the intraday level.)
 
For the purpose of day/intraday trading, you can drop crude oil’s use of any four-day measure. As with natural gas, the maximum time frame you want to consult is 36, 24 and six hours, seeing as how they are much more relevant.

In fact, six hours and 1½ hours might be all you really need, as hinted at in the summary appearing in Post #63.

The six-hour baseline suggests the eventual longer-term direction in which crude oil might be headed at the intraday level, so be prepared to enter positions on the contrarian side of this measure IF it is clearly sloping in one direction or the other—but be cautious! Such maneuvers can often turn out to be fully-fledged, wholesale reversals rather than mere pullbacks.

Previously the 30-minute baseline was assigned the role of suggesting whether crude oil's "money flow" was bullish or bearish, but it turns out that this measure is too unstable to be trusted. Consequently, the role of serving as the asset's "money measure" has been transferred to the 51-minute baseline (as confirmed by the seriously lagging two-hour moving average).

Even so, sudden spikes in the 8½-minute trend might cause traders to think that oil is reversing direction when in fact, it is not. So, to confirm whether this is the case, watch to see if price begins to push the contrarian side of the newly added 86-minute price range envelope at 0.45% deviation in the opposite direction. If it does, then you'll know the potential reversal is probably genuine. If it does not, then you should remain in the trade.

Crude oil tends to find significant support or resistance at the 1.2% to 2% deviation level of the 24-hour price range envelope(s) and/or at the 1.2% deviation level of the 6-hour price range envelope. Yet, on further analysis, it became clear that the 24-hour measure evidences a tremendous amount of lag when oil is trending. According, the 24-hour envelope at 1.2% deviation was deleted, and the one at 2% deviation was changed to a six-hour envelope, which resulted in a chart that fit the price action beautifully. (So then, it turns out that the six-hour measure IS the longest-term indicator crude oil needs at the intraday level.)

And regarding the oil's unruly price action—suddenly spiking or plunging to create false signals and whatnot—this can be handled relatively adeptly by trading on lower time frame charts and exiting positions entered when the 51-, 30-, 10- and overall progress of the 3-minute trend all came into alignment, as soon as the three-minute trend crosses back over the ten-minute measure; or if this leads to premature exits, then as soon as the three- and ten-minute trends cross back over the 30; or perhaps better yet…as soon as candlesticks and/or the three-minute baseline crosses back over the contrarian side of the ten-minute price flow channel at 0.10% or 0.20% deviation (following radical price swings).

(Again, given the erratic, spasmodic nature of crude oil's price action, you should be prepared to take profit at any time once price reaches the 0.50% deviation level of the 30-minute price range envelope, seeing as how oil will only very rarely evidence an extended run in one particular direction.)
 
It's looking to me like the trading I did in my Coinexx demo account Thursday, Friday and the first few hours today (Sunday) has provided me with the last bit of data/info I need to end this trial and error phase of commodity trading and begin trading with much greater frequency and significantly higher stakes per trade...

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Gold is "guaranteed" to deliver profit if one enters a long position when the 4½-hour price flow is maintaining a slope of at least 0.393, as conveyed by the associated lower-panel histogram; or conversely, generate positive returns when the 4½-hour price flow is maintaining a slope that is less than -0.393.

If gold is NOT maintaining the kind of trajectory mentioned above, then it is NOT likely to maintain a course in either direction—north or south—beyond the 0.70% deviation level of the 4½-hour price range envelope (at least not for very long).

Silver is "guaranteed" to deliver profit if one enters a long position when the 4½-hour price flow is maintaining a slope of at least 2.5299, as conveyed by the associated lower-panel histogram; or conversely, generate positive returns when the 4½-hour price flow is maintaining a slope that is less than -2.5299. (Generally speaking, once silver breaches this threshold, it will almost certainly sustain the trend, at least for a limited period of time.)

If silver is NOT maintaining the kind of trajectory described above, then it is NOT likely to maintain a course in either direction—north or south—beyond the 2% deviation level of the 4½-hour price range envelope.

Natural gas almost always reverts toward the mean once it reaches the neighborhood of the 1.5% deviation level of the 3-hour price range envelope, and if not, most certainly at the extreme level of 4.25% deviation.

Crude oil will not violate the contrarian band of the six-hour cloud at 0.30% deviation. If it does, then a reversal in the day-to-day trend is more than likely in progress—especially if price reaches the 0.50% deviation level of the contrarian band of the three-hour price range envelope as well (at which point, all of these measures are almost certainly going to begin reversing direction anyway).

If the foreign exchange currency pairs evidence a trending 86-minute price flow, then a relatively "good bet" is to enter positions on the contrarian side of the corresponding baseline. Otherwise, note that rates have a tendency to revert toward the mean at the 0.20% deviation level of the 83-minute price range envelope (and/or the 0.15% deviation level of the 34¼-minute price range range envelope).

Finally, the Forex pairs will usually not breach the contrarian band of the 83-minute price range envelope at 0.06% deviation unless they are initiating/maneuvering a reversal in the intraday trend. Or perhaps not so finally after all, because I want to talk a little about six-hour measures…

I have varied my representation of day-to-day price action when trading Forex using everything from four to 12-hour indicators. But, having now finalized so much in terms of Numerical Price Prediction (NPP), I presently believe the most useful among the longest/slowest potential measures I might apply to Forex day trading is the six-hour baseline and its corresponding price range envelopes at 0.20% and 0.45% deviation.

For one thing, the 45% mark appears to represent a relatively accurate "maximum acceleration" level, making it a reasonable take-profit target.

Moreover, when six-hour price action is definitely favoring a northbound or southbound directional flow, entering positions on the contrarian side of the six-hour baseline—or better yet, the contrarian side of the moving average envelope band at 0.20% deviation—following confirmation that price is coming out of the associated pullback (to be sure the pair is not in the process of executing a fully-fledged reversal) likely constitutes the most profitable Forex trade setup NPP has to offer.

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