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Trading Oil - "Velocity" system
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Trading Oil - "Velocity" system

  #1 (permalink)
 R.I.P. 1969-2016 
montreal quebec/canada
 
Futures Experience: Beginner
Platform: CQG/NT7
Broker/Data: IB/AMP/CQG
Favorite Futures: CL
 
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Trading Oil - "Velocity" system

I based my system on a very basic and maybe naive assumption derived from basic physic: it is called velocity. I quote Wikipedia:

Distinction between speed and velocity
Speed describes only how fast an object is moving, whereas velocity gives both how fast and in what direction the object is moving.[1] If a car is said to travel at 60 km/h, its speed has been specified. However, if the car is said to move at 60 km/h to the north, its velocity has now been specified.
The big difference can be noticed when we consider movement around a circle. When something moves in a circle and returns to its starting point, its average velocity is zero but its average speed is found by dividing the circumference of the circle by the time taken to move around the circle. This is because the average velocity is calculated by only considering the displacement between the starting and the end points while the average speed considers only the total distance traveled.

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Measuring dv and dr is not a problem it is what all basic momentum indicators do. My only problem was to measure dt.

For that I had to use range bar or constant volume bar since they are independent of time, time could be measured and used as an important variable of the system. And the same momentum analysis could now be performed on time as well.

So I build my system on that: 4 conditions.

1 – basic momentum analysis of price action (range bars)
2 – basic momentum analysis of time for the price action
3 – basic momentum analysis of the order flow (constant volume bars)
4 – basic momentum analysis of time of the order flow

I had to create all my indicators and conditions from scratch. I'm a little maniac with my systems and I do not like using indicators created by other people because I want to be 100% sure that the indicator does what I think it does.

When the 4 conditions are meet at the same time my indicator generate a signal and I take it (I don't think, I don't analyse, I do my best to be a robot). When people ask me what I do for a living I used to say I trade oil and people started to ask me what to you think about this or that (and frankly I have no clue if oil is going up or down) so now I use to say I have the most boring job in the universe, I have a green button and a red button. Sometime I push the green one and sometime the red one and I do that 4 hours per day...

I usually have between 5 to 10 signals per day and since I trade mostly between 8AM ET and 11AM ET I usually take 3 to 5 of them.

These kinds of setups are usually observed at the beginning of a move and at the end of a move. So my first rule is: if I have missed the first one I resist to the temptation to take the second one in the same trend, and If I don’t have one at or near the beginning of a trend I don’t take a late one.

The only drawback of the system is that I have to be very fast to react. CL is so far the perfect instrument for my system (not to slow not to fast).

I have no target and only a stop loss at 10 ticks. I’ve started using this system 5 months ago but with profit targets and it was a big mistake. When I was wrong my target was never hit and the temptation was high to reduce it (and I exit with a 4 to 6 ticks lose) and when I was right I was frustrated to have scalped only 10 or 15 ticks on a 40 or 50 ticks move.

I trade this system with 1 contract now and as soon as I will be more comfortable with it I plan to extend this to 5 contracts max. Since I only used market orders more than 5 could I think gave me inconsistent price entry levels and could introduce a lot of slippage ?

So far so good since I’ve never had a net losing day during the last 5 months. But some day I almost do not trade when I do not like market conditions. I do not have a compulsion for trading.

I’ve started this system with IB using CQG platform only for the system (I’ve tried NT without success due to my lack of programming skills) and I have now open a small account with CQG Platform/AMP and I plan to move it completely to CQG since it is much more adapted and easy to use for me (I really suck at programming).

Here is an example of what it gives (yesterday was also an exceptional day, usually results are around 50 to 70 ticks net).

Trade 1 : +18
Trade 2 : +48
Trade 3 : -4
Trade 4 : +84
Trade 5 : +10
Trade 6 : +43

(the trading journal of @lancelottrader has been one of the greatest help that I've found in this forum)

R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.
Attached Thumbnails
Trading Oil - "Velocity" system-trade1-18.jpg   Trading Oil - "Velocity" system-trade2-48.jpg   Trading Oil - "Velocity" system-trade-3-4.jpg   Trading Oil - "Velocity" system-trade4-84.jpg   Trading Oil - "Velocity" system-trade5-10.jpg   Trading Oil - "Velocity" system-trade6-43.jpg  

Last edited by Okina; February 13th, 2016 at 08:45 AM.
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  #2 (permalink)
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  #3 (permalink)
Market Wizard
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Thanks for sharing @Okina,

I have a few questions

By the sound of it, this is a very successful strategy. How many trades in total have you taken in the last 5 months?

What is your exit strategy, is it dictated by those 4 conditions in the same way that your entry signal is?

Because of your propensity to act as a "robot", why do you not automate the entries and exits given you use CQG?

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  #4 (permalink)
 R.I.P. 1969-2016 
montreal quebec/canada
 
Futures Experience: Beginner
Platform: CQG/NT7
Broker/Data: IB/AMP/CQG
Favorite Futures: CL
 
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Posts: 2,149 since Sep 2015
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xplorer View Post
Thanks for sharing @Okina,

I have a few questions

By the sound of it, this is a very successful strategy. How many trades in total have you taken in the last 5 months?

What is your exit strategy, is it dictated by those 4 conditions in the same way that your entry signal is?

Because of your propensity to act as a "robot", why do you not automate the entries and exits given you use CQG?

About 20 trade per week. Some day it could be 6 or more and some other 1 or 2.

No the exit is based on standard deviation.

I can't automate this system .It would be to complex to write some rules that I used and won't improve much the result. I may gain 1 or 2 tick of slippage per trade. CQG has also some technical limitation for example when you are using no time based bars you can't reference the result of an indicator into another indicator when both of them are based on range bar for example. So I have to do that manually (visually I should say). That is the reason why I have 2 charts one is a CVB and the other a RB charts.

R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.
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  #5 (permalink)
Market Wizard
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Okina View Post
About 20 trade per week. Some day it could be 6 or more and some other 1 or 2.

Thanks, so about 20 trades a week for 5 months works out about 420 trades overall. Would that be a fair assessment?

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  #6 (permalink)
Market Wizard
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Your journal

Looking forward to seeing your journal progress, Okina, and also to hearing more about your method. As a CL trader, I'm always psyched to see what other oil traders are doing. And, finally, like you, I often feel like I'm just pressing buttons.

Best of luck in the trading days to come.

Michael

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  #7 (permalink)
 R.I.P. 1969-2016 
montreal quebec/canada
 
Futures Experience: Beginner
Platform: CQG/NT7
Broker/Data: IB/AMP/CQG
Favorite Futures: CL
 
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Posts: 2,149 since Sep 2015
Thanks: 758 given, 5,415 received

I have made several mistakes before I found a profitable way to trade this system and I still have a lot of things to improve.

The main mistakes I have made so far:
  • When I've started testing this system I've realize that more than 80% of all the signals showed a potential profit at some point (meaning that the system almost never give a long signal on an exact local top or a short one on an exact local bottom). So I have thought that by using an ''appropriate'' target profit I could end up with a very profitable system. Of course as you can guess it was not the case. When I start doing that in the real world slippage, bad signals, transaction cost and the fact that it is not humanly possible to take all the signals gave me very poor results even if they were marginally profitable.
  • Since I'm a little stubborn instead of removing the target I have worked on improving the entry conditions (which was a good thing in the long run). I have improved the results but I have increased considerably my frustration. I was scalping large move taking only a small portion of them. Making 10 ticks when you see that you could have made 50 is very frustrating. Here the results were more profitable but not satisfying.
  • Finally I've decided to remove the profit target but my problem here has been the exit signal. It took me 2 months to find the acceptable balance between the risk and the reward and to learn how to let winner run despite some warning signals on the 2 ticks range bar. This part was the most difficult to achieve and lot of progress needs to be done here since it relies mostly on psychology than indicators. My rule now is: if I have a warning signal at the beginning of a move (when I have maybe only 4 or 5 ticks of potential profit) I exit immediately. When I have more potential profit 'in bank' I let it run until I have an actual signal in the opposite direction. The difficult part in that is that sometime I have a potential profit of 20 ticks but my actual signal in the opposite direction happens when I'm down to a poor profit of 4 or 5 ticks. If I start the day with a loss I tend to be very conservative which of course by the virtue of Murphy law happens exactly when I have a 50+ ticks move.
  • I had horrible results when I paper traded. Since it is not real money I tend to do stupid things just to ''try''. I have lost a lot of time because of that.

The mistakes I have not made (so far):
  • I have not search the web or books or trading rooms for the Holy Grail. I've started with a very personal idea and vision and I have developed it. Of course I've read many books and read many forums that have influence me in some ways.
  • I've never believed it would be easy.
  • I've start very conservatively with small trades, just 1 contract at a time.
  • I've have no 'addiction' to trading. By saying that I mean that of course I have some emotions when I trade I could be angry and could think I've done something stupid etc… but I'm never excited, my heart is never beating at 200 pulses because I'm winning or losing. I see too many people addicted to strong emotions and I was afraid to fall into that.
  • I took my time to develop my confidence in my system and in myself. Instead of doing a lot of backtesting and curve fitting I have manually and statically analyzed thousands of possible trades, each time taking notes of what have been right what have been wrong, is there a pattern or a logical explanation etc..

R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.
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  #8 (permalink)
 R.I.P. 1969-2016 
montreal quebec/canada
 
Futures Experience: Beginner
Platform: CQG/NT7
Broker/Data: IB/AMP/CQG
Favorite Futures: CL
 
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Need your help

Need your help.

I don’t know is there is a lot of people here familiar with CQG. But @xplorer ask me an interesting question: why not automating your system?

Here is my problem and if you have a suggestion you will have… my eternal recognition

Here is the main reason why I can’t automate the system.

The below chart is a perfect example of a trade that I took:

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The chart of the top is a CVB (this chart record price change and when we have X number of price changes on the bid or the ask a new bar is draw, the name is misleading it is not draw in function of volume)

Below you have a classical 2 range bar.

The little arrows are my indicator (green arrow = signal to go long and red the opposite). Bars are painted in green and stay green from the first signal to go long until we have a neutral signal (white bar) or a short signal (red bar). Of course it is the opposite for red.

I take a trade long or short only if I have at the same time a green or red arrow in the CVB chart and the RB chart. By same time of course it is not the exact same time if we look at the time stamp of the bar we will see a difference of several 1/10s.

So I would like to program an indicator that would draw the same little green or red arrows with the conditions that they appear at T + dT on both chart and dT will be a free parameter.

Unfortunately I have absolutely no ideas how to make that in CGQ ?

As an example in order to help understanding the problem the chart below is an example of a trade that I did not take.

Please register on futures.io to view futures trading content such as post attachment(s), image(s), and screenshot(s).

R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.

Last edited by Okina; February 14th, 2016 at 01:31 PM.
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  #9 (permalink)
 R.I.P. 1969-2016 
montreal quebec/canada
 
Futures Experience: Beginner
Platform: CQG/NT7
Broker/Data: IB/AMP/CQG
Favorite Futures: CL
 
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Posts: 2,149 since Sep 2015
Thanks: 758 given, 5,415 received

I have several other rules but I have figured out how to program them. This one is the only one why I have to manually trade this system.

R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.
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  #10 (permalink)
Market Wizard
London UK
 
Futures Experience: Beginner
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Posts: 3,050 since Sep 2015
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Okina View Post
Need your help.

I donít know is there is a lot of people here familiar with CQG. But @xplorer ask me an interesting question: why not automating your system?

Here is my problem and if you have a suggestion you will haveÖ my eternal recognition

Here is the main reason why I canít automate the system.

The below chart is a perfect example of a trade that I took:



The chart of the top is a CVB (this chart record price change and when we have X number of price changes on the bid or the ask a new bar is draw, the name is misleading it is not draw in function of volume)

Below you have a classical 2 range bar.

The little arrows are my indicator (green arrow = signal to go long and red the opposite). Bars are painted in green and stay green from the first signal to go long until we have a neutral signal (white bar) or a short signal (red bar). Of course it is the opposite for red.

I take a trade long or short only if I have at the same time a green or red arrow in the CVB chart and the RB chart. By same time of course it is not the exact same time if we look at the time stamp of the bar we will see a difference of several 1/10s.

So I would like to program an indicator that would draw the same little green or red arrows with the conditions that they appear at T + dT on both chart and dT will be a free parameter.

Unfortunately I have absolutely no ideas how to make that in CGQ ?

As an example in order to help understanding the problem the chart below is an example of a trade that I did not take.

It sounds to me that you want a formula that is able to account for both conditions.

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