Confession of a crude oil trader wanna-be

I’ve been checking the crude oil strategy and I notice that there is a bias towards finding the good things about the strategy and not in trying to improve. Like how well it manages the trend intraday, the percentage return with out leverage, and how nice is the system treating the structure of the last 3 sessions.

 

I tend to think: “wow, this is so nice, If would be trading with only technical analysis I don’t now how would I approach the market, I wouldn’t know what to tell to a possibly market opportunity, ufff systems are so nice”.

 

But something in my mind tells me that there is something I need to do a to improve. I think on the stop loss, I think on the process execution of the signal, in the fact that I am no trading it with real money…  ajhh still so distant to having a good approach towards risk management and even worse: I am located so far away of having the kind of money for testing such strategy with my own funds.

 

It’s kind of frustrating.  As far as I know I should sell a weak volatility and buy the wider ranges in the crude oil, according to the relative ATR to the closing price, on 22d.

I think I have faith on that some day I will tune up this strategy [and many more] and will be able to press the bid or ask using my opportunity costs represented in dollars.

Peeking oil volatility

We are currently studding a strategy for CL. Basically it says that if the percentage change in the 22d relative ATR is lower than –3% then a short position must be executed at the close of the session and buy it back at the close of the next day. Also if the percentage is higher than +3% then long position must be established at the close of the session and to be sold at the end of the next day.

So far we got a z-value of 2.8 without stop-loss using our data mine of daily CL prices since 1986. So far this 209 the overall return would be about 60% with a draw down of 20% in march.

What’s the next step?

1) try another percentage changes like four, five and so on.

2) add an stop loss to the system itself for smoothing the draw downs.

3) paper trade it for at least one week.