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Sunday, April 13, 2014

Crude Oil Futures Day Trading - Encore! Continued!



Well, I got myself into a bind with my sweet crude oil. I sold a contract which just kept going up, up, up. And it sure didn't look like it would ever come down. (and in fact, it hasn't to this day). I was losing thousands of dollars on ONE contract! So back to the drawing board. (yes, I'm still in paper money, thank you very much.)

It became instantly clear to the big dumb-dumb (that's me) that what I was missing in this little day trading game of futures is a STOP order. I was trading one contract and putting in an order for my profit target. But if the commodity moves against me, I was unprotected. So then I had to figure out how to do the stop order, making it a THREE item trade each time. I'm still studying this, as I need to figure out WHERE to put these stops, so that I don't keep bleeding losses.

Here's my "ladder" from Think or Swim, and I have indicated 1) the contract I bought at $104.02,

then 2) the "Limit" order to sell at $104.12 (which would give me a profit of $100, as each rung of the ladder is $10);

and finally 3) my "Stop" order in case the market goes against me at $103.99.



Since the stop was only 3 rungs of the ladder ($30) away, needless to say, I got stopped out within seconds of making this trade. But that was still better to lose $30 than lose thousands!

So now, the trick becomes how to gauge WHERE to put the stop. This is where your chart comes in, and the "tick" chart is handy because each rung of that ladder represents one tick.

Also, don't forget that on this TOS "ladder" you can put your cursor on those STP (stop) and LMT (target buy) icons and simple SLIDE them up and down as you sit watching the golden price move up and down. If you want to sit at your desk and daytrade, you can try to "outrun" the movement if your stops aren't in the right place, or if your targets are too high or not high enough. It is really fabulous software this "Active Trader" stuff.

I'm re-setting my P & L to represent what I had before $ 6,559.29(on the blog), and then, for today, showing this current small loss: (i.e. I am ignoring the BIG loss that happened between 4/3 and 4/13, which convinced me I needed stop orders,) as I trying to see how long it will take for me to build this fund, doing things properly:

  • Date--------------- # of Trades--Daily Profit---$5K Fund Balance
  • March 25, 2014-----18 trades-----$415.08-------- $5,415.08
  • March 26, 2014------3 trades-----$678.19-------- $6,093.27
  • March 27, 2014------9 trades-----$157.50-------- $6,250.77
  • March 28, 2014------3 trades----($427.76)--------$5,823.01
  • March 31, 2014 ---- 4 trades----$195.71----------$6,018.72
  • April 1, 2014---------6 trades----$377.95----------$6,396.67
  • April 2, 2014--------15 trades---$642.02-----------$7,038.69
  • April 3, 2014--------10 Trades--($379.40)---------$6,659.29
  • April13, 2014--------1 trade--($30.00)------------$6,629.29


  • Yeah, yeah, I know this isn't very sophisticated and certainly OBVIOUS to any real trader that one needs stops, but I'm self educating here! And it's not so easy to find Futures training (FREE) that is readable. A lot of trader talk, but not a lot of straight talk, so I'm trying to put out there in dog-shit-simple language for all the newbies following along with me. Hope it's helpful to at least ONE someone. Let me know!

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    Thursday, April 3, 2014

    More about daytrading Crude Oil

    Okay, the profits are slowly growing. I am testing my chart settings, tweaking here and there, but never giving up on a trade unless I am certain that it was an error (fat finger) to begin with. Yesterday, late in the day, I put in a trade and volatility slowed to almost nothing but the market dropped like a stone and I had played the upside. My $600 winning day was showing as a $400 LOSS but I just closed the screen, went to work and went to bed when nothing moved in my favor.

    This morning at about 8 a.m. everything woke up again and I heard the wonderful "ding" that the ThinkorSwim platform chimes when a transaction has filled. Sure enough, I made my $70 win on that losing trade SIMPLY BY BEING PATIENT AND NOT OVER-REACTING TO BIG LOSSES.

    So, here's a tally of my futures account to date on paper money:

    I started this project on March 25th, 2014. Mind you, this is a paper money account set for a $5,000 (minimum) fund just to test the waters:

  • Date--------------- # of Trades--Daily Profit---$5K Fund Balance
  • March 25, 2014-----18 trades-----$415.08-------- $5,415.08
  • March 26, 2014------3 trades-----$678.19-------- $6,093.27
  • March 27, 2014------9 trades-----$157.50-------- $6,250.77
  • March 28, 2014------3 trades----($427.76)--------$5,823.01
  • March 31, 2014 ---- 4 trades----$195.71----------$6,018.72
  • April 1, 2014---------6 trades----$377.95----------$6,396.67
  • April 2, 2014--------15 trades---$642.02-----------$7,038.69
  • April 3, 2014--------10 Trades--($379.40)---------$6,659.29


  • You might wonder what my chart settings look like right now. I rely heavily on the three indicators I am using.

    Time Frame on Charts - "Today - 133 Ticks"
    Since Think or Swim does not offer "second" charts (one minute is the smallest time frame), it was suggested that I use "ticks" instead of minutes. So I set my charts for "today" and the minimum ticks of 133 to daytrade futures. So a new candle forms with every 133 ticks. Obviously, when volatility is high, the candles form very quickly. There is a counter in the lower right corner showing the total ticks from 1 to 133, so a quick glance also gives you the volatility feel at that time of day. I am finding mornings much better to trade oil futures than any other time frame.

    Volume Profile Indicator
    I have the Volume Profile set for 2 Hour increments. In other words, it breaks the day into two hours and the chart can be zoomed in to show only the current 2 hours, or zoomed out to see the full day's activity:



    The heavy red line in the middle of the chart is the "Point of Control." I think of it as the "median" to which the prices rotate around (and not always). You will note however that the median MOVES with every two hour segment, so using this POC line for my trades, I make my decisions based on very short time frames. Using the support and resistance lines I trade up or down around this POC line, but in small amounts. In the example above, I may have BOUGHT a contract at the red line price of $99.53 and IMMEDIATELY set a SELL order at somewhere between 99.70 and 99.75. If the next candle is red, I might "slide" (on the wonderful TOS ladder) the sell order down a couple of notches, (thus making less profit) but making a win more probable on the candle or two after that.

    Please note the counter (of ticks) is at 94 in the example above. How fast that counter moves is a quickie way to judge volatility.

    RSI Wilder
    I have my RSI indicator set for 7 days, with the common 70 - 30 parameters for oversold, overbought. I try to make trades with RSI, MACD and Volume Profile are all going the same direction.



    MACD
    My setting for Macd are 8, 11, 9, EMA. I'm still tweaking these indicators, as I'm no professional at charts, and am really a rank amateur at knowing the math behind them. I rely on word of mouth, and suggestions from other traders. So I am passing this information along, simply as a post about WHAT I AM DOING, and not as any kind of recommendation. Since I am having success with this strategy at the moment (and it may be purely beginners luck), I thought curious traders might want to know how exactly I'm trading. Here's my Macd.



    ThinkorSwim's "Active Trader" ladder
    I presume that different brokerages have different tools for their traders, but I really like Think or Swim (TD Ameritrade's download platform) for its ease of use. The Active Trader tab gives you a "ladder" of prices, and you can buy and sell futures simply by clicking on the left green box (buy) or the right red box (sell) next to the price you want to trade. You can set an exit order immediately right on the ladder and you can watch the prices rise and fall right on the ladder. By using your mouse you can actual "slide" an open order to a different price rung at will.

    In the example below, I have purchased a contract for $99.54, and set a sell order for $99.57 (each rung of the ladder is $10, so this is set for a $30 profit.) That little -1 limit box can be moved up and down with your mouse, to change the order. It's almost instantaneous and VERY COOL to use when daytrading. You may scoff at $30 as a profit target, but if you day trade this for a few hours, you can make a nice sum of money every morning.



    The gold square in the middle is the current oil futures price. The $99.54 surrounded by arrows is my open contract. And the red box -1 limit is my sell order not yet filled. When it fills, ThinkorSwim will chime and I know I've got a profit. So sometimes I place my order and close the screen, ignoring the ups and downs, so that I keep my fear/greed emotions OUT of trading.

    Happy Trading!

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