Hi - First Post - Algo Trading the CL

Quote from day4night:

You might want to get John Hull's book on futures and options, or something similar. Learn about basis, contango, backwardation etc. Also again, with oils the time of day can be very important, to say nothing of the season. You can usually catch the fireworks starting between about 14:00 to 14:30 every Friday. I avoid trading at that time, preferring to enjoy the show.

About the different prices for different months, it's usually about the cost of storing the commodity (inc'l interest), and some kind of forward view or hedging demand from participants. Contango means deferred contracts are higher than near, so the market pays you to store oil if contango is beyond the cost of carry. So when there's a steep contango but everyone's screaming that there's so much oil lying around and the price is too high, well, a lot of that supply they're talking about might just be there because of the contango.
The gasoline and heating oil (read diesel, jet fuel and heating oil) markets are also very interesting and exhibit pronounced seasonality. There's a lot of commercial hedging going on in these, and they can also be spread like CL.

You can also spread say gasoline against crude, or gasoline vs heat, etc etc.

About how the months move differently, for ease let's think heating oil. It's early October and reports come in that an extremely cold winter can be expected along with a burst of strong economic activity around the New Year. Which month of heating oil will rise more, oct, or dec? You get it, the higher dec prices encourage you to buy heating oil now that you can sell later for a profit. You could buy real heating oil and at the same time sell it in the futures, locking in the price. (You still have a margin call to worry about, however, should the price jump, though it's less of a problem since you own the physical.)


A great book is Oil 101 by Morgan Downey. His blog is scarcewhales.blogspot.com.

Also check out Gregor.us, and FT's Energy Source blog, and weekly EIA reports as well as IEA reports. Maybe you're purely technical, I don't know. Also theoildrum.com but quality there varies.

A existing system which may work with crude is the ACD, from the book The Logical Trader. Basically a volatility breakout system based on time. Real vol, not implied.

What language(s) do you program?
More...

Thanks for taking your time here, looks like to be a pro you have to really do the research on this thing.

I use Sierra Charts automated spreadsheet system - not sure if you have seen that or not - basically i come up with formulas all based on the same prop. design that I made up a while ago. It deals with a few things - mostly rate of change and angle correlation to an adaptive ema and 2 exponential ema's - I have a few variances of course
 
I use ACD system as my main tool trading Oil, and so far has work great, I've been doing it for 2 years in a half, I support my entries on fundamentals first, and look for the A up or A down base on my beliefs for the day, but I didn't it know I could use for spreads, would like to know you could inform more about it thanks.
 
ACD I meant for outrights. I don't think off hand it should work for spreads. However it just might, seeing that intermonth spreads seem to trend pretty well most of the time. I'd be concerned about time frame and do a lot of back testing.
 
Thanks.
Now I have question, that might be a little of the topic, but since you mention spreads, I am trying to get into spreads, do you know a "cheap" or reasonable price platform, that will show charts of spreads, as X_Trader spread does?.......thanks.
 
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