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How many contracts can crude handle?
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How many contracts can crude handle?

  #1 (permalink)
Trading Apprentice
Tel Aviv, Israel
 
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: CL
 
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How many contracts can crude handle?

Hey guys,

Quick question.

So I'm about to start day trading CL with 1 contract.

My question is, how many contracts can CL handle from a day trading perspective?

I rarely hold positions for more than 2-3 hours.

Say I eventually scale up to 5-10 contracts, what's the limit in your opinion where you'd start seeing problems in slippage in market orders or have problems getting a limit filled?

Or with this kind of size do you think it wouldn't be a problem at all?
(Assuming it's not trading first 5 minutes of inventory report, for example)

NinjaTrader's official position limit on Crude is 20 contracts so... anyone wanna throw their 2 cents in?

If this sounds like a silly question I apologize in advance.


Last edited by mzelixon; November 6th, 2017 at 03:13 PM.
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  #2 (permalink)
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  #3 (permalink)
Market Wizard
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mzelixon View Post
Hey guys,

Quick question.

So I'm about to start day trading CL with 1 contract.

My question is, how many contracts can CL handle from a day trading perspective?

I rarely hold positions for more than 2-3 hours.

Say I eventually scale up to 5-10 contracts, what's the limit in your opinion where you'd start seeing problems in slippage in market orders or have problems getting a limit filled?

Or with this kind of size do you think it wouldn't be a problem at all?
(Assuming it's not trading first 5 minutes of inventory report, for example)

NinjaTrader's official position limit on Crude is 20 contracts so... anyone wanna throw their 2 cents in?

If this sounds like a silly question I apologize in advance.

Generally CL's market can take 5-10 contracts fine. This, like in all markets, depends however on the time of the day and any data releases or news that may affect liquidity.

If you are starting now and starting with 1 lot, this should not be a problem that concerns you too much. It is however advisable to have an understanding of how liquidity works before moving up.

Note that even with 1 contract you can (and likely will) experience some slippage at some point, depending on whether you enter/exit using market orders or where your stop-loss is placed for exits.

I refer you to this post for a general discussion about slippage, although in the example we were discussing ES which is a much thicker product than CL.


Last edited by xplorer; November 6th, 2017 at 04:06 PM.
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  #4 (permalink)
Trading Apprentice
Tel Aviv, Israel
 
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Posts: 10 since Mar 2014
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Hmm,

Yeah that's what I figured,

I think I saw the thread and it's pretty funny because I actually hate ES

I'm very much a CL-only trader (for the moment anyways)

But even regarding liquidity, CL is still very liquid!!!

Obviously not AS liquid as ES but 500k+ every day (on the active month) isn't exactly what I call "illiquid"

My initial guess was because the Ninjatrader position limit was 20, I could scale up to there too during heavy trading times.
(Of course that kind of size is far down the road for me atm)

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  #5 (permalink)
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it can take as many CNTS u have the guts to throw at it. wont tell u day or time. But here goes before CL move started

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  #6 (permalink)
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I've seen CL with more volume than ES lately, but it's normally always just behind. My mentor day trades 5-10 regularly, but throws in a 20 lot for swing trades. Deeper pockets than I've got. I think your trading style would also be a big factor. Sounds like your not a scalper, so you should be ok. Like paps said though, CL is a gutsy instrument and can leaving you speechless in the blink of an eye. Good luck and trade the edges!

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  #7 (permalink)
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I think this has been pretty well answered.

I just wanted to mention that the term you're looking for (in case you wanted a deeper dive) is called "market impact risk". Wikipedia has a brief article; it's not super informative and not practically useful but may give perspective. https://en.wikipedia.org/wiki/Market_impact

I don't daytrade and I do not put on 10 CL k's at a time (I do algorithmic entries and discretionary exits, if that makes sense), but I agree that the market risk is going to be *roughly* the same with each additional k as long as you're under 10 k's..all other things being equal. Once you get above 10 k's, impact risk starts increasing with each additional contract added to your order. Then, once you hit 20 k's, market-impact risk really starts increasing with each additional k. This assumes there is no scaling-in/out.

Now, this is not to say that it should not be done, but this is definitely to say that a trader cannot freely enter/exit whole 20-contract positions in the same way he/she would a 10-contract position..that's all. It can be done, but the trading style has to change to accommodate.

...btw, I'm basing this on my own studies (data analysis) of order flow, so I'm sure plenty of reasonable folks could differ with me and I make no warranties about what I'm saying. But I think you can get a fairly good idea of the answers you're looking for just by watching the reconstructed tape and watching how the prices moves in accordance with the larger'ish consummated deals...at a given time of day. just my two cents.

In fact, I would say that understanding this behavior (and what should/should not happen) is a critical component of order flow trading. But mmmeh, at some point I would like to make the switch back to pure'er'ish discretionary trading and so it's on my mind atm.

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  #8 (permalink)
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paps View Post
it can take as many CNTS u have the guts to throw at it. wont tell u day or time. But here goes before CL move started



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My brain is obviously hard wired to see swear words, I totally misread your first sentence lol


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  #9 (permalink)
Sharpening mental edge
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paps View Post
it can take as many CNTS u have the guts to throw at it. wont tell u day or time. But here goes before CL move started



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My brain is obviously hard wired to see swear words, I totally misread your first sentence lol


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  #10 (permalink)
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rassi View Post
My brain is obviously hard wired to see swear words, I totally misread your first sentence lol


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Bahahahaha

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