Just a few questions about investing in oil
- Thread starter AstroDomine
- Start date
I am also new to trading oil. I decided I will start with CL. The way I see it is that it cannot be SO hard to make money with it. The way some people are describing it makes it sound like you have a 90% chance of losing to begin with, whereas the probability of winning is only slightly less than 50% due to slippage, spread and commissions.
But the commissions are low, so is the spread, and yet the leverage is huge. If you picked only long trades (it tends to go up overall, especially now that it's low), you should have more than 50% of getting it right.
Then, if you pick only long trades when the market is highly oversold (it's easy to measure that, a big daily red candle) and it is starting to reverse (easy as well, a finished 15 minutes green candle), your chances of succeeding get even higher (you could place a takeprofit and stoploss equal to 500 dollars per contract). This is just an improvised system, but I think, if you apply it, it should work.
Then if you have enough money that you can afford a few more contracts and can add to your position if it goes against you (yes, I do mean "adding to a losing position"), then I would say to forget about stoplosses because it is almost impossible to lose (and if you use a stoploss that goes off all the time, it's easy to lose every day).
Say you start your long at 67 when the market is at -2.0 points compared to the previous day's close, and it still goes against you, you wait for it to go down to 66 (almost impossible), then go long another contract. If it still goes against you and comes down to 65, you go long yet another, third, contract. Then you wait for a huge rally. If it doesn't happen, which is almost impossible, then, if you exit your position, you have lost around 3000 dollars, but how often will this happen? I mean it's very rare to see a market that goes straight down for two days in a row (maybe it happens once a year). So actually I wouldn't exit that position at all, and I would stick around waiting for that green 15 minute candle and an ensuing reversal that should last at least 2 or 3 hours. If it fails and starts to go down again, then you can sell and take whatever loss, but most likely less than 3000 dollars. Yes, because it came down to 65, and you went long your third contract, so you are not losing anything on that. You are losing 1000 on the second contract, and 2000 on the first one. At this point it lost 4 points for the day and it should bounce at least one point, which would allow you to exit at breakeven, and only because the market was really against you. Now someone will be upset and tell me that Cl could go down to zero, but it never happened before. You could die as you trade as well. Anyway, I didn't test this, so I can't guarantee anything. Also, if you want to use stoplosses, it is simple, as I said use a bracket order with an equal amount of a few hundred dollars for stoploss and takeprofit.
Recapitulating, I would say just go long whenever it looks right to you - best if it's highly oversold (and better yet if it has gone down for many hours, more hours than it usually does) and starting to reverse - and you'll make money. Use a large bracket order that exits at 400 dollars loss or win, more or less.
This whole method should only trigger for one trade/position opened (and closed) per day. Because, if you get addicted and start looking for more than 1 trade per day, be careful because obviously you could lose everything. When you start trading more often, you will take the SHORT side, which is less favorable statistically. Also, you will get in and out a lot more often with smaller wins, and this will increase all those fixed costs we spoke about earlier. So you could actually end up losing money every day.
Ok, I've tested it on the 60 minute candle bars. This yields about 60% for the past 10 years:
If c < closed(1) - c*0.02 and c > c[1]
and c < c[2]
and c < c[3]
and c < c[4]
Then Buy("Long") This Bar;
If openpositionprofit > c*0.02 or openpositionprofit < -c*0.02 Then ExitLong This Bar;
-----
Go LONG if the close of the last 60 minutes candlestick is above the close of the previous candle but below the 3 candles before that, and it's oversold by -2% compared to the previous day.
Exit if you're making a 2% move in your favor or against you.
------
Of course if you can add your discretionary intuition to all this, things should go better. For example, you could look at the ES to better pick your entries. And then, if it goes against you, for every extra point, you can add 1 contract (and still apply stoplosses on each entry). You can't go wrong.
If c < closed(1) - c*0.02 and c > c[1]
and c < c[2]
and c < c[3]
and c < c[4]
Then Buy("Long") This Bar;
If openpositionprofit > c*0.02 or openpositionprofit < -c*0.02 Then ExitLong This Bar;
-----
Go LONG if the close of the last 60 minutes candlestick is above the close of the previous candle but below the 3 candles before that, and it's oversold by -2% compared to the previous day.
Exit if you're making a 2% move in your favor or against you.
------
Of course if you can add your discretionary intuition to all this, things should go better. For example, you could look at the ES to better pick your entries. And then, if it goes against you, for every extra point, you can add 1 contract (and still apply stoplosses on each entry). You can't go wrong.
I came up with an even better one, but it doesn't trade very often (yet it is not over-optimized):
If c < closed(1) - c*0.02 and c > c[1] and time = 2100 and c < c[2] Then Buy This Bar;
If openpositionprofit > c*0.02 or openpositionprofit < -c*0.02 Then ExitLong This Bar;
---
It says GO LONG at 9 PM EST if we're 2% below yesterday and the last hour is higher than the previous hour, but lower than the hour before that. Exit your trade as soon as you see a move of 2% in your favor or against you.
----
Profit factor of 5, and 80% of wins (tatio win/loss 1.36). Only 33 trades in the last 6 years though.
If c < closed(1) - c*0.02 and c > c[1] and time = 2100 and c < c[2] Then Buy This Bar;
If openpositionprofit > c*0.02 or openpositionprofit < -c*0.02 Then ExitLong This Bar;
---
It says GO LONG at 9 PM EST if we're 2% below yesterday and the last hour is higher than the previous hour, but lower than the hour before that. Exit your trade as soon as you see a move of 2% in your favor or against you.
----
Profit factor of 5, and 80% of wins (tatio win/loss 1.36). Only 33 trades in the last 6 years though.
Actually I made a mistake above. When I said 21.00 EST I really meant 21.00 CET. It would be 15.00 EST.
So, in EST, the final formula reads as follows:
If c < closed(1) - c*0.02 and c > c[1] and c < c[2] and time = 1500 Then Buy This Bar;
If openpositionprofit > c*0.02 or openpositionprofit < -c*0.02 Then ExitLong This Bar;
So, in EST, the final formula reads as follows:
If c < closed(1) - c*0.02 and c > c[1] and c < c[2] and time = 1500 Then Buy This Bar;
If openpositionprofit > c*0.02 or openpositionprofit < -c*0.02 Then ExitLong This Bar;
Quote from travis:
I am also new to trading oil... The way I see it is that it cannot be SO hard to make money with it. The way some people are describing it makes [/i]it sound like you have a 90% chance of losing[/i] to begin with, whereas the probability of winning is only slightly less than 50% due to slippage, spread and commissions.
But the commissions are low...
Thanks you for being a poster child for newbie traders everywhere. "The way you see it" is not how the "market" sees it. There is a long line of bodies on the way to the brokerage houses, who got a first hand lesson on market efficiency, self-confidence, backtests and many other things.
1) if it were so easy, don't you think the institutional traders would do this? They arb the bejabbers out of most exploitable edges.
2) IF you took your philosophy down to the casinos, where the rake/odds are similar to commission/slippage, you would learn that is IS so hard to make money, and the "90% chance of losing it" are probably underestimating it. Even when people win at the casinos, the house knows they will likley give it back if they keep betting. A 2-3% advantage grinds down a bankroll with amazing efficiency given enough time at the tables.
3) Many years ago, there was an experiment with a number of Ph.D. students. They were given some kind of gambling/trading method that favored them. More than 90% of the students lost their money. This is where even with an edge, money/portfolio/trade management kills off most traders. Also known as "Risk of Ruin" which is NEVER zero for any trader, as the investment banks thought they had addressed with their clever Quants, etc.
Any time it seems logical and simple, then the problem is with you, not with the markets or prevailing wisdom in a field.
Quote from travis:
Ok, I've tested it on the 60 minute candle bars. This yields about 60% for the past 10 years:
Given enough time, you will learn that this is not how the market works. Backtesting is a great way only to learn how to predict the market in the past.
If you do not agree, then spend some bucks, and carefully analyze how 1000s of well-intentioned people went to some of the tracking sites like timertrac, futuretruth, robbins world cup/championship, collective2, and others. you will see thousands of failed trading ideas/systems , mostly dormant or killed. And of the remaining "live systems" almost all are random or failed. The few good ones, are usually only there out of luck or "survivorship bias."
I am also new to trading oil... The way I see it is that it cannot be SO hard to make money with it. The way some people are describing it makes [/i]it sound like you have a 90% chance of losing[/i] to begin with, whereas the probability of winning is only slightly less than 50% due to slippage, spread and commissions.
But the commissions are low...
Thanks you for being a poster child for newbie traders everywhere. "The way you see it" is not how the "market" sees it. There is a long line of bodies on the way to the brokerage houses, who got a first hand lesson on market efficiency, self-confidence, backtests and many other things.
1) if it were so easy, don't you think the institutional traders would do this? They arb the bejabbers out of most exploitable edges.
2) IF you took your philosophy down to the casinos, where the rake/odds are similar to commission/slippage, you would learn that is IS so hard to make money, and the "90% chance of losing it" are probably underestimating it. Even when people win at the casinos, the house knows they will likley give it back if they keep betting. A 2-3% advantage grinds down a bankroll with amazing efficiency given enough time at the tables.
3) Many years ago, there was an experiment with a number of Ph.D. students. They were given some kind of gambling/trading method that favored them. More than 90% of the students lost their money. This is where even with an edge, money/portfolio/trade management kills off most traders. Also known as "Risk of Ruin" which is NEVER zero for any trader, as the investment banks thought they had addressed with their clever Quants, etc.
Any time it seems logical and simple, then the problem is with you, not with the markets or prevailing wisdom in a field.
Quote from travis:
Ok, I've tested it on the 60 minute candle bars. This yields about 60% for the past 10 years:
Given enough time, you will learn that this is not how the market works. Backtesting is a great way only to learn how to predict the market in the past.
If you do not agree, then spend some bucks, and carefully analyze how 1000s of well-intentioned people went to some of the tracking sites like timertrac, futuretruth, robbins world cup/championship, collective2, and others. you will see thousands of failed trading ideas/systems , mostly dormant or killed. And of the remaining "live systems" almost all are random or failed. The few good ones, are usually only there out of luck or "survivorship bias."
k c u l
http://i.current.com/images/asset/897/266/38/php9rKCUl.jpg
or
o r c a m
hmmm ?
www.pedrocarneiro.com/images/erkoreka_stradivarius.jpg
http://i.current.com/images/asset/897/266/38/php9rKCUl.jpg
or
o r c a m
hmmm ?
www.pedrocarneiro.com/images/erkoreka_stradivarius.jpg