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Smaller size CL trading ?
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Smaller size CL trading ?

  #1 (permalink)
Elite Member
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Smaller size CL trading ?

Hi Traders

I have been enjoying trading the ES & 6E and want to try a few strategies on CL. The thing is I like to trade in multiple lots, typically I enter with 3 lots and scale out 2 lots quickly and look to run the last 1 lot depending on market conditions.

My strategies will require a 10 tick stop in CL so my max loss per trade with 3 lots is going to be 3 x 10 x $10 = $300. This is a little outside my comfort zone as I like to keep my max loss per trade around $100.

So aside from trading 1 contract of CL (which I don't want to do as I like to scale out) what other instruments can I use to trade crude oil. Being in the UK I have access to CFD and spread betting however the spread quoted is like 4c which make the strategy impossible.

I thought about an oil ETF but again that will get messy with the pattern day trade rule etc.

Anyone got a decent solution?

Thanks


londonkid

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  #3 (permalink)
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PS - I know about the QM contract, it wouldnt be viable for me, volume is too low and it moves in 2.5c ticks, I need the 1c granuality

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  #4 (permalink)
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@londonkid:

If you want to stick to Crude Oil, you might size down to the Crude Oil Mini (QM), which is only half size of CL ($500 instead of $1.000).

But you should carefully watch the liquidity, since QM trades with far less volume than CL.

Edit: Since you already discovered the disadvantage of QM, why not try a less 'expensive' instrument such as NQ, which moves only $5 per tick ?

"If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much." - Jim Rohn
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  #5 (permalink)
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Daytrader999 View Post
@londonkid:

If you want to stick to Crude Oil, you might size down to the Crude Oil Mini (QM), which is only half size of CL ($500 instead of $1.000).

But you should carefully watch the liquidity, since QM trades with far less volume than CL.

Edit: Since you already discovered the disadvantage of QM, why not try a less 'expensive' instrument such as NQ, which moves only $5 per tick ?

The strats I am running will only work on CL. I just thought about trading the ETF USO but the market hours will scupper it. If I want to trade out of NYSE hours I cant. It looks like the CL futures are the only way to go for me. I wish there was a CFD provider with a sensible commission structure where I could trade the underlying market, maybe there is but I havent found it yet.

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  #6 (permalink)
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Well, I don't trade CFDs anymore, and as you probably know, when you trade CFDs you are trading against your Broker which is the exact opposite of a regulated market like futures are...

So, if your CL strategy works that well, you might take into consideration building your account up to a size where you can afford the risk of trading 3 contracts.

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  #7 (permalink)
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Chart CL, trade QM. Plenty of volume. Don't chart QM.

https://futures.io/commodities-futures-trading/1303-cl-crude-oil-futures-contrac...-size-value-margins.html

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  #8 (permalink)
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Daytrader999 View Post
Well, I don't trade CFDs anymore, and as you probably know, when you trade CFDs you are trading against your Broker which is the exact opposite of a regulated market like futures are...

I'm not sure why people keeping stating/saying this, when it simply isn't true: the CFDs follow their futures equivalent in price with at least a 99.8% consistency, except for a wider spread (depending on broker, up to 5c for CL, but 3c can be found) The CFDs are available on many platforms, not just MT4. They are quite centralized, and there is no such thing as stop runs or fear of broker intervention, as long as you have chosen a proper broker. I have traded them and still do for longer established swing moves (via MT4) and have no issues: there are never ever any anomalies or price differences from their CL current month contract. In fact, I would propose the CFDs are at least as well behaved and offer equal or better liquidity than QM.

And an advantage: many brokers offer a continuous instrument, that does not expire like the Nymex monthly contract do: not having to roll allows one to just stay in positions, and not have to worry about being forced out or auto-closed; GCT Trading (MT4) is one such broker.

Frankly, as long as one sets profit targets closer by the 3 or 4 cent spread, and gives oneself a smidge more on fringe stoploss triggers, it can be traded with the exact same success as the current CL contract. And argueably, it can be done with a smaller account since the increments can be 0.01 of the full 1 lot Nymex contract; IMHO a great way to learn it. Typically what I do, is have NT as my main datafeed and viewing of CL charts, and I will take some trades in MT4, scalps or build positions. And BTW, you can be both long and short in it, like with spot forex. (Although I believe USAers aren't allowed to trade this)

BTW, another trick is to get a demo MT4 account like from GCI, download the MT4 iPod/Android version to your mobile device, and, as long as you have a data connection on your mobile device, you can see/view/chart live futures prices, for everything that broker offers (GCI offers the vast majority of futures, inclusing 'obscure' ones like lumber, platinum, etc.) And the demo is perpetual and free - since most platforms we use around here do not have a Android/iPod solution, I find this quite helpful when not at my main trading station.

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  #9 (permalink)
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londonkid View Post
Hi Traders

I have been enjoying trading the ES & 6E and want to try a few strategies on CL. The thing is I like to trade in multiple lots, typically I enter with 3 lots and scale out 2 lots quickly and look to run the last 1 lot depending on market conditions.

My strategies will require a 10 tick stop in CL so my max loss per trade with 3 lots is going to be 3 x 10 x $10 = $300. This is a little outside my comfort zone as I like to keep my max loss per trade around $100.

So aside from trading 1 contract of CL (which I don't want to do as I like to scale out) what other instruments can I use to trade crude oil. Being in the UK I have access to CFD and spread betting however the spread quoted is like 4c which make the strategy impossible.

I thought about an oil ETF but again that will get messy with the pattern day trade rule etc.

Anyone got a decent solution?

Thanks


londonkid

There aren't any other vehicles for (Nymex) CL trading other than what the CME offers, and the various CFDs that largely mimic price, except for the average 3-4 cent spread, which are available on various platforms. This page shows their spread as 4c, yet on another page it shows 3c. http://www.gcitrading.com/cfd-share-trading/spreads-margins

I do not trade GCI with a live account, but I've checked their spread and even at the lowest liquidity times it is 3 cents (on a demo account, which doesn't mean the real account feed has the same conditions). That's not bad, and I would think it is something you can account for in your strategy, esp, since you can control risk better, since they allow 0.01 lot increments. I am not endorsing GCI, as I know nothing about their real account operations; they appear to have been in business for 10+ year, but operations may be China based. Interesting, and buyer/trader beware.

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  #10 (permalink)
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Manresa / Spain
 
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The only thing that you can do with CL, is trying to sell one contract early, like Mark Douglas says in his book.

For example: Long on 90.10 with 3 contracts. Sell one in 90.15, your stop is now only $150. 2 contracts with 10 ticks of stop = $200 but you already won $50.

If not try trading only 2 contracts.

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