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CL went a bit mental after the API number, first it dropped like 60T, then back up 75T, down another 40T (all in a matter of 1-5min) and then back up 40T where 45.75ish acted as resistance (low June 13).
The headline number was a draw of 5.764m vs. an expected draw of around 2.8m. Also gasoline stock was down -5.7m which showed higher demand in the US. I guess, summer vacation has started and many are using the cars to get around.
Let's see what we get for EIA tomorrow. I never trade CL before the release as it is normally pretty quiet and rangy, hence I don't really like it and just wait for the release and then trade accordingly, so no CL trades till 10am CET tomorrow. Here is a nice API stock graph for 2017:
here is my morning preparation. Check it out and let me know if you like it. 10min till EIA but we just had some movement and I wonder if the info has already been leaked?! who knows but be careful and respect your stops while trading inventories as it can be pretty crazy like yday's API
I thought I'll also share my approach of inventory days as these can be and most of time are the most volatile days during a CL trading week. As stated before, I never hold positions going into the release anymore. I used to do so in the past but a couple times I lost a lot and therefore minimized my risk. Even if you have your stop on, I had days where slippage was 30-50T and with a couple of contracts it can produce a big loss. That's the reason why I stopped having a position on before and just use the day to sleep a bit longer, have a chilled longer breakfast and watch ES and might put a couple trades on there.
EIA and API connection
Every Wednesday morning (or sometimes Thursdays, like today when we have a holiday on Monday) starts with checking the previous day's API number. Most of the time it gives an indication where we could be headed with EIA numbers. As today we had a very similar number -6.3m EIA vs. -5.8m API. I'm also tracking inventories in a spreadsheet (see below). I use it to check where we have come from over the past weeks and how accurate API and EIA have been previously because there are always days where API and EIA are completely off but as you can see the majority of days we are in line on both numbers. Then I also compare expected vs. actual numbers, e.g. if actual and expected are almost the same then CL's movement is sometimes very small and it just ranges or continues its trend.
EIA release and source
Then I open up the link from the EIA where at exactly 9:30am CET (Wednesday's) or 10am (Thursday's) publishes their inventory report. I find this link much faster than any other economic release calendar website. Here it is: https://ir.eia.gov/wpsr/overview.pdf
Minutes before it looks like this:
Then at exactly release time, the browser window changes to this here:
Here I look straight in the 2nd row (number I marked in yellow) to know the headline numbers and then I quickly check gasoline and distillates as these also affect CL. Gasoline obviously gives an indication of supply/demand for cars and distillates are mostly diesel. Hence, both pretty much give an indication of demand over the last week. A nice draw will show demand and a build that there hasn't been used much over the last week compared to the week before.
Trading hours
Normally, I would only trade 1h up to 2h after the release. The most action is within the first 30min post-release and afterwards we normally enter into a rangy dull session, hence it makes sense to protect profit if any or stop when I have a small loss. Revenge trading doesn't normally work as the market is too slow and then it is better to look at other futures like ES.
I ended up taking 11 trades in total and had a couple good and some bad trades where ATM took me out too early or didn’t move to BE after being onside with a tiny profit. I almost stayed within my self-imposed rule of not having more than 10 trades a session, just 1 over lol. But also when we have such quick movements after the release it is really easy to get stopped out on the tick, hence if I still believe in my strategy I would re-enter.
Here are all my trades on a 1min chart (pretty messy, again):
See also 2 charts attached in 15 second bars so you can see it much better:
Auto trailing stop: Trigger is +7 (in profit), then stop will automatically be moved to +4 and then with every 2T of more profit, the stop moves 3T behind the actual price. Hope that makes sense otherwise I’ll explain in more detailed for anybody who hasn’t used the ATM strats.
Overall, I wasn’t as aggressive as I normally trade these days as I can’t scale in and I really have to stick to my stop. That on the other hand made me a bit more hesitant and fearful of being stopped out quickly and be done for the day. In the end I think I managed it well but I’m still debating how to set my ATM and trailing stop. I think, I will leave it as it is and wait until I have reached 100 trades and then do an analysis what tick values I should use. I believe it’s important to at least have 100-200 trades and then do a good analysis what works and doesn’t. If somebody after e.g. 5 trades changes something then your sample size is way too low and there wouldn’t be any reliable data to work with. Basic principle of statistics! So I can only wait and see and just need to pick the right entries and then let the ATM do its thing!
Of course the trade table (Excel in previous post) shows me that on 2 losing trades I was up +3T and I could easily change my ATM now to BE when having +3T but I leave it at 4 as it’s only 1 tick and will analyse next week when I hit 100 trades. So I can’t be upset about trades where I’m onside 3T and then get stopped out.
In the end, I'm happy with the day as I did stick to my risk rules and didn't increase my stop level and did not scale in a 2nd lot what I did yesterday twice. I just need to build a bit more profits and then I can start trading 2 lots. Right now, a 2lot trade has $170 risk including commissions, hence 1 2lot trade and 1 1lot trade would hit my daily risk limit. 2 losers in a row can happen very fast on CL, hence I at least allow myself 3 trades before stopping!
So that was day 3 of the challenge, wow it does take a lot of time putting all these posts together. So hopefully some of you find it good to follow. A "thanks" in the journal challenge where I entered, here is the link
Tomorrow is the first Friday of the months, which means we will get non-farm payrolls at 7:30am CET.
I won't be trading as it is a bit too early for me and I'm more focused on CL. Hence, I'll let it pass and also with a 1.75pt stop-loss on ES I can easily be stopped out while it's moving like crazy. I'll be watching it while preparing my daily prep sheet and then be ready and fresh at 8am. See y'all tomorrow. Have a good afternoon/evening!
@mastadee, thanks for taking the time to make such detailed posts. I really like your charts and analysis that you've posted before in TSJ and the additional detailed information that you're posting in this thread about your method, setups and how you approach your trading day. Great stuff!
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