How to hedge Natural Gas and Crude?

[vincentvega]

Quote from oldtime:

QM? QG? That's where I started out. Do you realize how much a small trader can lose in just those two contracts? Like the man said when I asked him, how much do youi need to trade CL? and his answer was, and I believe him, "About 500k."

I'm pretty sure I read a total dip shit small retail trader like post from you elsewhere on the board so STFU.

I digress. Please forgive my anger. However someone needs to tell you, taking an expert stand on an issue that has not increased your net worth is disingenuous and annoying. This goes to the couple of other sim account traders here. I appreciate the helpful feedback from the others - braincell, the1.




The mini's have low volume, and I've never traded them before. The principle said he would be fine with a 60% chance of a blow out off the bat. If the first trade works and we're not in a drawdown (latter unlikely), we're fine.

PS. extra apologies for my rough attitude. Unfortunately some men are terrible learners though.

 

[Handle123]

Quote from vincentvega:

No forex is a whole different game. I'm also proficient in commodities.

Any ideas on how to hedge this? I'll try out the ES, but not sure if other contracts will work better.

You are really proficient in commodities?

My Uncle used to tell me, if I have to ask a question, I better know the answer, for years I could never understand what he meant, funny how age teaches us.

First off, since you are "proficient in commodities", you know you will lose all your money, small accounts will be wiped clean in matter of weeks. Especially if you are going to trade Crude Oil or Natural Gas.

Secondly, if you are asking about spreading, this is a total new ballgame than just trading outright positions. Not talking about buying one month and selling the next month, but a hedge can also be considered a spread. So what has ES have to do anything with Energy market? Sometimes they both in same direction and other times not.

For my long term trading of commodities, I always hedge with options. I have certain rules of time nature of how long to have Puts in place when long the futures. Took me two signals in Natural Gas, buying on April 20th and also buying puts for so long then selling them for a loss, changing my breakeven stop on the long position to include the loss.

But if you are going to go this route, you going to have to have a ton of money, not cheap in the least.

When folks have little amounts of money, long term stocks using weekly bar charts is my answer.

Good luck.

 

[AK100]

Quote from vincentvega:

Are there any suggestions on how to hedge NG or CL to reduce volatility and drawdowns besides just using fewer contracts? If possible, something besides ETFs or options - thanks for the insight.

You want it all, profits yet limited drawdowns volatility.

That's not what hedging is about. Hedging is about accepting a fixed price today so whatever happens to price in the future is not relevant.

However, if you want to reduce volatility and drawdowns increase the amount of money per contract traded. But no doubt if you were to do that you'd then complain that your profits weren't that large....

 

[ogarbitrage]

Trade any of the front months spread to Dec12 in the typical bull/bear spread manner.

 

[oldtime]

Quote from vincentvega:

I'm pretty sure I read a total dip shit small retail trader like post from you elsewhere on the board so STFU.

I digress. Please forgive my anger. However someone needs to tell you, taking an expert stand on an issue that has not increased your net worth is disingenuous and annoying. This goes to the couple of other sim account traders here. I appreciate the helpful feedback from the others - braincell, the1.




The mini's have low volume, and I've never traded them before. The principle said he would be fine with a 60% chance of a blow out off the bat. If the first trade works and we're not in a drawdown (latter unlikely), we're fine.

PS. extra apologies for my rough attitude. Unfortunately some men are terrible learners though.

well, I guess you sure told me off. You are correct, I'm no expert, but I'm expert enough to know if you have to ask a question on the internet you aren't one either.

otherwise, the QM did increase my net worth, but it didn't take me long to realize I didn't have enough money to hang on if it had gone the other way.

and speaking from just a money management viewpoint, it is generally accepted as a bad idea to be willing to take a 60% hit on your first trade.

but to each his own. and that is my Elite opinion, if you want an expert opinion go to Expert Trader.com

 

[vincentvega]

Quote from oldtime:

well, I guess you sure told me off. You are correct, I'm no expert, but I'm expert enough to know if you have to ask a question on the internet you aren't one either.

otherwise, the QM did increase my net worth, but it didn't take me long to realize I didn't have enough money to hang on if it had gone the other way.

and speaking from just a money management viewpoint, it is generally accepted as a bad idea to be willing to take a 60% hit on your first trade.

but to each his own. and that is my Elite opinion, if you want an expert opinion go to Expert Trader.com

thanks for the response.....my thoughts too......

 

[plyka]

Quote from vincentvega:

I'm trading a tiny account (full disclosure, not mine) with a system of mine on energy and other volatile contracts. My worry is blowing out the account with one contract before anything really happens.

I guess I could use the DX as a hedge, but not sure if that's any less volatile. Maybe the ES?

You're barking up the wrong tree. You have a mini-account and want to hedge your CL/NG with ES? That's just playing with fire.

Why don't you use the mini contracts, I know both the CL and NG have mini-futures. I think for the CL it's QM which is 50 barrels, but there may be another one that is only 1/3 the size of the normal contract.

If the account is even too small for 1 mini contract, then your account is simply too small.

 

[oldtime]

Quote from plyka:

You're barking up the wrong tree. You have a mini-account and want to hedge your CL/NG with ES? That's just playing with fire.

Why don't you use the mini contracts, I know both the CL and NG have mini-futures. I think for the CL it's QM which is 50 barrels, but there may be another one that is only 1/3 the size of the normal contract.

If the account is even too small for 1 mini contract, then your account is simply too small.

yeah, we already tried to tell him that and found out we were dumbshits

 

[plyka]

Quote from austinp:


Lastly, don't let the CL's impressive potential lull you: it is a veteran trader's symbol only. It will eat newbie traders for breakfast, lunch, dinner and snacks in between.

That's just the flat-out truth, so prepare yourself accordingly

Just out of curiosity, why do you think that the CL is so difficult to trade? The only 2 futures markets I ever fully trade and make money on, are gold and oil. Gold is my main market, in my opinion, it is without doubt the best market in the entire world to trade. I swing trade gold, my latest position i've been holding for almost a month now. CL on the other hand, is my daytrading vehicle. I love to day trade the CL and when you compare the CL to something like the NQ/ES/etc, it is sooooooooooo much easier to trade. Why don't you see the CL as a great trading vehicle (short term vehicle at least, as I would agree with you on the longer term horizon, i have never been successful at consistantly making profits in CL)?

Compare the CL versus the ES for instance. The CL has much less noise, far less temporary spikes in either direction taking out prior highs/lows to only turn around.

 

[oldtime]

Quote from plyka:

Just out of curiosity, why do you think that the CL is so difficult to trade? The only 2 futures markets I ever fully trade and make money on, are gold and oil. Gold is my main market, in my opinion, it is without doubt the best market in the entire world to trade. I swing trade gold, my latest position i've been holding for almost a month now. CL on the other hand, is my daytrading vehicle. I love to day trade the CL and when you compare the CL to something like the NQ/ES/etc, it is sooooooooooo much easier to trade. Why don't you see the CL as a great trading vehicle (short term vehicle at least, as I would agree with you on the longer term horizon, i have never been successful at consistantly making profits in CL)?

Compare the CL versus the ES for instance. The CL has much less noise, far less temporary spikes in either direction taking out prior highs/lows to only turn around.

good for daytrading but hard to hold longterm