I wonder if anyone has any advice on how I could become very knowledgeable on trading crude oil. I am thinking books or websites that I could read from the ground up. If anyone has any advice, I would love to hear it.
I have a futures account, and I have not invested in oil - it seems so volatile.
Happy Day to you!
Greta
The following user says Thank You to Tiffsgreta for this post:
The obvious way to start is to trade the micro contract and do it first in simulation and when you feel more confident move to real money and then to the bigger contract. Assuming you have a base of trading knowledge, for example trading index futures, and just want to try crude, no amount of reading will get you profitable. Here is a strategy I used to run when I traded crude years ago: A few minutes before 10:30 Eastern on Wednesday (EIA report) place a buy order and a sell order (OCO) about 6 ticks away from price. Set your targets about 12 ticks away and enjoy! Now, this stopped working a long time ago, which is why, along with the fact that I had my face ripped off by crude several times, that I don't trade it anymore. But, things change and it might be working again, I haven't checked. I think it would be a fun thing to try again in sim mode.
Good luck in your trading!
The following 2 users say Thank You to huracan for this post:
Thank you so much huracan - you have provided me such a great idea. Ill probably try it sans realtime, and just check out what would happen on paper to give me a feel for it
BTW I have so money in gas options and a mini contract - I hear its the crack cocaine of futures. We'll see what I'll rip in that! Thanks again.
I referred you to the CME website because it's important to understand the basic mechanics of futures markets before diving in. If you truly have all that covered then I'd recommend some of the resources available right here on this website.
For example, this thread, The Scalper's Journey, describes in detail at least one method of scalping crude oil, and also covers in greater detail the bracket trade mentioned above.
But it's also important to find a method or style that suits your personality. Time-frame, for example, is one of those things that's very helpful to define ahead of time. The shortest time frames (market-making and scalping) have the highest relative transaction costs and extremely tough competition. Due to the high execution costs (commissions plus slippage) relative to profit targets of just a few ticks, scalpers need a very high win-rate in order to be successful. Moreover, an individual scalper must compete directly with the most sophisticated institutional traders in the game (HFTs, quant shops, hedge funds etc), making it an extremely challenging environment to succeed in. But if you can achieve success in this arena then the law of large numbers will provide you with some of the smoothest daily return profiles achievable in futures trading.
On the other end of the spectrum - swing trading - the competition is much thinner, transaction costs lower, and the setups perhaps a bit easier to identify, but the intraday P&L swings are also much greater and difficult for many traders to endure. Swing traders must be prepared for the possibility to have losing weeks and months at a time, even when trading a proven successful long term strategy. Again, this is not for everyone.
And then with your time frame defined you need to choose some sort of a style or analytical framework that not only suits your brain but also works. Price action trading, order flow, volume profile, or some unique combination are but some of the methods that traders apply to the crude oil market. You may wish to explore these concepts, watch some of the webinars on this site or read books and articles dedicated to these methods, or you may instead wish to simply watch and study the market independently in order to detect patterns and setups on your own.
It's a long process, one that is likely to take several years to gain the proficiency, but there's no shortage of information available for the enterprising student of the markets.
The following user says Thank You to Schnook for this post:
https://us.econoday.com/byweek.asp?cust=us
10:30am Eastern Wednesday, (11am Thursday when Monday is a holiday), is the big major news event for Crude every week. Look at a depth of market and you will see market depth drop to a fraction of normal size as people pull their orders before the report. It might look good on sim with instant fills depending on your platform but in reality you would likely get big slippage on your entry stop above or below the market. So when looking at your paper results, or a graph afterwards, don't assume you would have got filled at +6 or -6 ticks. Presumably huracan says it stopped working because of the whipsaws in price after entry.
Trading, ideally structured, is a vehicle for expanding consciousness, not damaging it. - Brett Steenbarger
The following user says Thank You to matthew28 for this post:
Just be careful if you are trading QM. Slippage can be high there and price can be 0.20 - 0.30 higher or lower than the full sized CL contract at the same time. Happened to me last year... on QM it hit my stop since API resulted in big spike but on CL it did not even hit that price (max it went was 0.30 lower than the QM price).
Also, during the DOHA week years ago QM opened below support while CL opened above support... big difference. Then I learnt the hard way that we should be analysing CL when trading crude since it is the more liquid of the 2. CL, not QM chart will show you the correct TA to take for trades (though you can enter the trades via QM).
Good luck and happy crude trading
Numbers work... Magic lies in the numbers
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By 2019 I had stopped trading it, but when I traded it successfully the bid-ask spread was reasonable. I don't remember the slippage being a problem then. I had this strategy automated in NT7 and it worked for a while (years), until it didn't.
The following user says Thank You to huracan for this post:
Interesting. Btw I tried this last yr and I ever had 10 ticks slippage triggered on my sell stop trigger order... for 1 EIA report
Ever since that happened, I kinda stopped this strategy too so I have no clue how it performs now either
ps: before that big slippage happened, I was also thinking that *maybe* I figured an easy, foolproof way to make money on EIA but it seems the MM knows about our game and has put an end to it lol.
Good thing to be aware of is who the other players are. This is the proverbial African watering hole and you are a chipmunk. The hedge funds seem to get an idea and go big while the huge commodity houses play amazing games showing us that hedge funds are sometimes the dumb money.
Sign up with John Kemp at Reuters, the London based energy reporter. It is free. He posts a lot including COT positioning.
The following 3 users say Thank You to Trailer Guy for this post:
It won't necessarily help with your trading per se, but if you are really interested in the oil industry read "Oil 101"
by Morgan Downey. Some of the chapters are pretty heavy about oil specifically and what its made up of, little too much for me, but others about how its drilled etc are interesting.
As well I recommend tracking Tracy Shugart, goes by @chigrl on twitter. Shes been on plenty of podcasts, shes an oil trader I feel is good for getting some info from. Won't make you a pro oil trader, but if you are a fan of podcasts and want to listen about oil trading tales etc. and a traders journey, go dig up some of those.
The following user says Thank You to lexknight for this post:
I'll keep this short and sweet - I'm reading a book called 'Oil 101' that someone kindly suggested and I do like background on anything I do. As to making trades - not yet. Still don't feel the knowledge bubbling over bob666s. I'm not a scalper or a day trader but a long term swing trader. I like option spreads, which give you a deal more flexibility and time to watch the market.
I appreciate your frank reply. I trade energies for a family office. PM me, I'll give you some ideas on how to trade oil profitable in the long run. (it's not technical analysis).
It is volatile enough to tear your head right off without warning. You should know that it attracts a lot of people who see an opportunity but do not see the risk. It's an easy thing to go broke in, and quickly.
If you're just starting in futures, it may be wiser to try something else first. Stock index futures (especially ES, the S&P futures contract, and actually MES, the micro version of the S&P contract) are slower and sort of boring by comparison... and are far safer and may be a better initial choice. I would look around a little first.
I don't mean to discourage you if oil is definitely your choice.... Well, actually, I do mean to discourage you , at least about oil. My suggestion is to be extremely cautious if oil is what you try the first time out. Money gets lost in oil very fast.
I would look around this forum and absorb as much as you can, about oil and also about futures trading in general. Also, I would avoid any offers from anyone to show you something special that will help you, if it is not free or low-cost and publicly available. It will help them, not you.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
The following 2 users say Thank You to bobwest for this post:
If you are still open for more options, you try fxview. They post crude oil fundamentals on socials like facebook. Also they post charts with resistance and support levels. Can be really helpful for tracking events.
The following 2 users say Thank You to Vroon5 for this post:
I agree Ron you gotta be able to withstand the heat from time to time. CL is it's own beast and technical analysis can go right out the window. I use to trade the inventory report and it was almost to say free money. Since the oil crash in April I just don't see the EIA report like in the past and have pretty much ignored them. I'll go in from time to time on any given day on an impulse or responsive PA (context in mind) other than that I've been treading very differently since then.
The following user says Thank You to TraderGee for this post:
