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is this insider trading?
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is this insider trading?

  #1 (permalink)
Trading Apprentice
Tokyo Japan
 
Futures Experience: Intermediate
Platform: CTS T4, MetaTrader
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Posts: 39 since Oct 2011
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is this insider trading?

Yesterday's CL 1 minute chart before the 7:30 news, it looked like a deliberate insider trading setup, I suspected it but didn't dare to take action due to a lack of experience and conviction.

to more experienced traders, does this kind of setup occur often? does anybody trade this exclusively? what's your success rate? what kind of R:R can we expect?

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  #2 (permalink)
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  #3 (permalink)
Elite Member
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I'm not really sure what you mean by "insider trading" because it doesn't exist in commodities in the same sense that it does in equities.

BUT reversals at prior day highs and lows happen very frequently. It's likely just a coincidence that it happened prior to news.

"If I agreed with you, we'd both be wrong."
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  #4 (permalink)
Elite Member
las vegas
 
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I don't think he means insider trading the way we think of insider trading. Regardless, yes this is normal. Price frequently returns to retest significant levels that have been previously broken.

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  #5 (permalink)
Fortitudo et Honor
Austin, TX
 
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addchild View Post
I'm not really sure what you mean by "insider trading" because it doesn't exist in commodities in the same sense that it does in equities.

BUT reversals at prior day highs and lows happen very frequently. It's likely just a coincidence that it happened prior to news.

Ummm, yeah, it does.

When the Department of Labor publishes their labor report, if it's particularly good or bad, it moves the CL market (sometimes significantly). So, if you were fortunate enough to get inside information about the report before it's released, then you could either enter position at an advantage or exit your position before disaster, take profits with less slippage, etc.

If the Fed is going to announce another round of quantitative easing, don't you think that drives the price of commodities wildly upward (with the destruction of the value of the $USD)? Don't you think that's valuable information to have ahead of time?

If the President decides to even hint or announce at the idea of releasing the strategic oil reserves...don't you think it would beneficial to know that before hand, as it would have a drastic bearish effect on CL....

There are other less pronounced movers, like the petrolium inventories report (which can indicate over/under supplied), and everything from manufacturing numbers, durables, redbook, etc, etc, etc.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #6 (permalink)
Survivor
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Very normal for CL to change direction and run for a bit before news when orderbook gets light as people are waiting for the news so trading programs can run the price more easier.

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  #7 (permalink)
Fortitudo et Honor
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Think of it this way.......

If you knew CL was likely to drop at least $5 on the release of the Strategic oil reserves (it usually drops much more than that, but lets just play it safe)

If you're able to gain an intraday trading rate for CL, your broker could offer CL contracts for as low as 1/4 the overnight margin, that means roughly $1600/contract right now.

So every $1.60 you've essentially doubled your money.

If you had 10 contracts and shorted prior to the news, even if it only moves $3.20, you double down at $1.60 and that 2 full value move becomes a 400% move (double your money 2x).

I could go on and on and on, you don't think insider trading happens when people in the State Department know inside information about what's happening in Iran? Egypt? Lybia?

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #8 (permalink)
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RM99 View Post
Ummm, yeah, it does.

When the Department of Labor publishes their labor report, if it's particularly good or bad, it moves the CL market (sometimes significantly). So, if you were fortunate enough to get inside information about the report before it's released, then you could either enter position at an advantage or exit your position before disaster, take profits with less slippage, etc.

If the Fed is going to announce another round of quantitative easing, don't you think that drives the price of commodities wildly upward (with the destruction of the value of the $USD)? Don't you think that's valuable information to have ahead of time?

If the President decides to even hint or announce at the idea of releasing the strategic oil reserves...don't you think it would beneficial to know that before hand, as it would have a drastic bearish effect on CL....

There are other less pronounced movers, like the petrolium inventories report (which can indicate over/under supplied), and everything from manufacturing numbers, durables, redbook, etc, etc, etc.

I think were referring to different things, im referring to "insider trading" as in a securities market , But the entire concept of speculating in commodities is based on the idea that you know more than the next guy. In the commodities market where the main players at the table know the likely outcome of a report, they position themselves for it. I wouldn't consider it insider trading.

Maybe it is insider trading, but im say that it doesn't matter, and you sure as heck probably wont ever see it on a chart.

All information is disseminated through price right?

"If I agreed with you, we'd both be wrong."
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  #9 (permalink)
Fortitudo et Honor
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addchild View Post
I think were referring to different things, im referring to "insider trading" as in a securities market , But the entire concept of speculating in commodities is based on the idea that you know more than the next guy. In the commodities market where the main players at the table know the likely outcome of a report, they position themselves for it. I wouldn't consider it insider trading.

Maybe it is insider trading, but im say that it doesn't matter, and you sure as heck probably wont ever see it on a chart.

All information is disseminated through price right?

Insider trading is insider trading, doesn't matter what the instrument class is.....

The essence of the concept is that someone is an "insider" with information not available to the rest of the market. It doesn't matter if it's a politician with access via their station, a bureacrat with access because they manage relevant reports and information dissemination, or a company officer because they have intimate knowledge about a company.

Whether it's a politician who knows that a bill is likely to be squashed or approved (that benefits or harms particular companies or markets), whether it's a judge that about to rule on a suit (that has an effect on commerce or companies) whether it's a bureacrat (like those at the Department of Labor or the FDA).

We're more accustomed to hearing about insider trading with equities, where company officers know of relevant changes that affect a company's stock valuations....whether it's a merger, an approval/rejection of a key drug going through trials, the award (or loss) of a contract for making component parts on the next Iphone, etc.

The essence of insider trading is that there's a natural market inefficiency where information is not universally available.

I'm glad that people are waking up to the idea that politicians are in just as much a position to commit insider trading as CEO's or company employees (same with judges and bureacrats).

And I'm convinced that it goes on with equities as well as commodities and virtually any manner of instrument class.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #10 (permalink)
Fortitudo et Honor
Austin, TX
 
Futures Experience: Advanced
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Posts: 882 since Mar 2011
Thanks: 128 given, 703 received


Interestingly, there were certain banks that made a fortune shorting airline stocks JUST prior to 9-11. That's because they had "insiders" with access to government officials who knew that an attack was immenent.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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