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It really comes down to your trading rules / methodology with a sprinkle of money management. What trading system are you using and what does it call for in regards to stops? What is your win %?
For me, I am strictly a technical trader that uses previous swings for my SL. With that, my SL is never the same distance in ticks, points or pips. Some trades my SL is as little as 10 and other trades my SL can be 50+ ticks, points or pips.
I'm not trying to be a asshole, just want to help. However, if you have to ask the question, you might need to do some back testing or forward testing with a demo or small account before you put up some of your hard earned $$$. If you have never traded CL, then stick with what you know.
I'd be happy to give you some feedback if you let me know your trading style / method to see if it fits the CL.
Normally I trade the 6's (6E, 6J, etc.), but I've been keeping a close eye on the CL market for some time. I find it fascinating.
Seems to me it could be a prime candidate for an auto trader robot. So I'm experimenting by first adding more than just the 2 standard indicators I use with the 6's. I may need 3 or 4 for a robot. But secondly, and most importantly, it looks like a much longer time frame will be required in my chart settings, maybe even daily bars.
All that said, I'm thinking of experimenting with a point system generated by the indicators. Each would have a value of 0, +1, or -1. If the total of the indicators hits +4 go long.
The big issue at the moment is analyzing volume - I can't make heads or tails of it. For the time being I'm ignoring volume completely but it keeps gnawing at me. Until I decide whether or not to ignore volume altogether I'm stuck in a corner and cannot proceed.
The weekly loss limit only applies until you get the trailing max drawdown at your starting balance for the combine.
CL can move nicely with some good trends. I have been monitoring it for a while. It can also be a real beast at times.
Keep your risk small. This will give you some room for making bad trades. There is nothing that says you have to complete the combine in the time given. That is just a minimum number of days. Right now I have about 11 days of trades on step 1 alone. It's my fault for making some dumb trades but because I kept the losses relatively low I never came close to the daily or weekly loss limits.
Your stop loss should be determined by market conditions and not some fixed amount. If the market is trending nicely you can get away with a smaller stop and a bigger position. If it is choppy then a smaller position and a bigger stop is needed.
Point based system sound real interesting. Takes a lot of the interpretation out. So would a -4 mean to go short? Have you tried any of this with any other instrument or market?
I am by no means a pro with using volume, because I don't use it and never have. Analyzing volume could be as simple as using the indicator. The more the volume the higher the bars are. What are you using to anazlye volume?
Yes, a -4 would mean go short. I'm working on this with a few other instruments but since I'm teaching myself coding it could very well be awhile before I make any serious progress. Like with all coding the littlest things always seem to trip me up.
But the overall idea is relatively simple. There are two parts to the strategy - the setup and the confirmation. It would go something like this . . .
The setup would require two indicators. For simplicity sake, let's say a MA crossover plus a MACD crossover. The logic would be: If MA crossover AND MACD crossover then next.
As for the confirmation things gets a little trickier, but one idea would be a volume weighted moving average. When used in conjunction with a simple moving average we'd check to see if the VWMA was above the SMA for confirmation of a bullish move. If so, then next.
Then lastly I'd toss in one more market check for double confirmation. One of my favorites is AutoTrendH (available on this site), but this is all still up in the air. Anyway, I'm sure you get the gist of it all by now.
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Where life gets really tricky within all this is defining the parameters within each indicator such that it creates the points system I spoke of earlier. (-1, 0, +1) For some indicators it's much easier than with others. Take oscillators, for example. With some oscillators peaks and valleys represent opportunities to enter the market. However, other oscillators are the exact opposite in that peaks and valleys represent overbought and oversold areas.
Which now has me on another tangent in the world of coding, normalizing several different indicators to generate points. (-1, 0, +1) Visually, I'd be able to normalize these indicators to look something like the image below. Not until all horizontal rows were flashing the same color would I enter a trade.
Holy crap man, this is pretty awesome stuff. I can't be of any help with writing any of the programming stuff. I have hard enough time writing my name. But if you hit any bumps with the technical stuff, let me know. Looking forward to seeing your progression.
Thanks for the offer. Yes I do need some help in this area but not right away, my brain needs to stop hurting first from all the other coding issues.
From a big picture perspective, I'm trying to ensure that the majority of the time I stay out of trades. In other words, make it really, really hard to even consider a trade. This falls back on the old adage that 70% of market moves occur over only 20% of a given time frame.