Wednesday, January 18, 2012

Held on longer on my crude trades

Today, crude oil was my big winner with a little more than 100 ticks net profit. I did try to hold on to my winners a little longer today which for me is not necessarily an easy task considering crude's volatility. But I think I did a better job than usual. Other trades involved a long gold/short euro spread that was also profitable but (again here) it would have been even more so had I held on longer. T-notes are giving me a real hard time lately. I wish a trend will materialize soon  in order to get rid of that horrible chop-chop environment. I still have my long natgas position from Monday opened. At one point today it looked as if a short squeeze was underway but it didn't last very long. So, I'm still down $2000 more or less on this one. Tomorrow might see a resolution to this trade as the EIA forecasts another bearish number in terms of gas withdrawals. Wait and see. Net result for today: +$1489 trading 2 contracts (commissions included).


  1. Well, I said hold on, but not for bigger potential losses. I'm pretty sure I saw a trade that you took with 48 ticks of heat on the CL (Jan 18th). There's nothing you can do with a trade like that but get so scared that you'll be ecstatic to break even. Sure, on the results page, it may be claimed as a 10-15 tick win but my gawd, you can take 10 ticks of heat on the CL and get 15-20 ticks

    I don't know what technicals you use, but I've been at this 8.5 years full-time and we both know that there are some really good brain-dead volatility studies in the public domain which work really well on a nice moving contract like the CL. Here's a snapshot of one from today (Jan 19th).

    This chart is basically an intraday timeframe that's mechanical for the most part: enter on the closing price of a candle color change. The stats on this trade are that there's 20-30 winners a day with 10 ticks being the max risk you'll ever have to take and your rewards range from 10 ticks to 80 ticks with the average winner falling between 20-23 ticks on a 10 day shifting basis.

    I only show this to confirm to anyone reading this that you are I-N-S-A-N-E to ever take more than 20 ticks on an intraday scalp on the CL. 10-15 ticks is plenty.

    I'm trying to enlighten, not negatively criticize here. We all lose in order to win long-term. But you've *got* to keep those losses small or you can't get consistent 1.5+ reward to risk ratios working for you unless you do that.

    I'll take a 50/50 trade if I can get a setup with good reward to risk ratios. I'll take a near 1:1 payoff ratio (e.g., risk 10 ticks to make 10-12 ticks) if I know from my research that that trade is a 70%+ winner over many, many trades. But I'll NEVER take a trade to risk more than I have to win because super high winning pcts are demanded (80%+) for that to work out in the long run and there's just too many low-stress easy 50/50's w/good RR ratios out there by comparison to even let that dominate your trading.

    I can't argue with your overall results, but based on my experiences, I can say with some authority that your trading would absolutely explode to the positive by 2-3 fold on the 2 contracts you're trading if you stop taking deep retraces against you and be less fearful in strong trends about taking profits.

    I agree that 20 ticks is about right on the average scalp on the CL. My stats confirm this. But the intuition part of trading will also tell you when it's best to forget the averages and go for 30-80 ticks several times each day.

    Good Luck. There's a much better trader inside of you than this blog is revealing. Your results are good but not impressive for the types of risk you're willing to take. This has more to do with your emotions relating to money and losing, not your overall ability to trade for a decent living.


    [Note: all volatility studies have the weakness of whipsaws in tight ranges. However, the CL is not going to consistently whipsaw you on low volatility from the hours of 8:00 AM - 11:30 AM EST.]

    1. Thank you very much again Steve! You are very generous and I hope your insights will help me as well as the other readers of this blog.