Confession of a crude oil trader wanna-be

Posted on by joachin

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.

Swing and blogging

Posted on by joachin

I feel that I can’t resume my market thoughts so often like other traders. I know I am no a full time trader, but I see markets all the time.

 

By now I am in a situation like I was in the batting practice two weeks ago: when it came the second turn take 24 swings in the batting cage, bi the 5th swing I couldn’t continue as solid as the other contacts with the ball. I couldn’t move the arms and the shoulders to meet the ball with my momentum because of lack of energy.

 

Same here at blogging. I need more conditioning in both sides of this speculative life. The curious thing here is the role that alimentation has: A good eating system will create good opportunities for both developing the physical conditioning for a decent batting practice and for a vividly experience in the market’s sessions.

 

Wishful thinking in the Euro

Posted on by joachin

A couple of good friends, from my “eco” group, requested me to do all the paper work for opening a forex account. I suppose to design the strategy and show them what I got when I finished. They wanted to start with US$200. In part this is what made to stood still and do nothing.

If I had opened the account I would have gone long the euro back then on July 09. Buy at 1.4150 and today the mark to market is 1.4565, discretional trading. But I would look for a weekly positional strategy.

 

Although the average daily volatility would have squeeze the $200, I have this feeling of frustration for not getting long in that long term rally.

BUT

1) I don’t have the amount of $ for establishing a positional system [taking that volatility].

2) I am focusing on scalping the Oil. Either with USO or long in-the-money-options in the futures.

3) I really have no more space in my daily agenda for deepening in market study. I think this will be possible about the end of 2010.

 

4) For now, I rather build the sources that feed the trading account and do research in the mean time.

 

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Peeking oil volatility

Posted on by joachin

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.

What about coffee

Posted on by joachin

When I began to write this post I was about to say that coffee is more volatile from the rest of the markets I follow. But then I thought “before thinking about this, I should rank the relative ATR for this mkts”. Here is what we have:

 

 imageimage

 

Coffee is not the most volatile commodity among my tickers. Basically those are energies like NG and CL… and sugar. NG is almost double KC’s average true range related to the last closing price.

 

There is a little opportunity here: We have upward potential for 5 and twenty two days with a z value of two and 47% and 35% probability of loss respectively. But the expected value are too short: 1% for the 5 day strategy and 4% for the 22day. This is not based on ATR but in an indicator, which I was learned a couple of semesters ago, named Location which basically measures how away is the last price from its trends resumed by long term moving averages.

 

Also I want to see the Options. And we have this:

One month ago from this post the call/put ratio was 1.94 and today it is 1.90. No difference you may say. But the open interest dropped 53%. There was 83k calls in the beginning of august and 42k puts.

 

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So in options we have the same “expected” scenario but with lesser voters willing to risk their capital supporting this.

 

Apparently in KC the bid call indicador [email me if want to know about this at joachin[at]ufm.edu] the singal is a reversal because we have had call weight but puts’ levels are closer to reality.

What if we sell some calls at 160 and sell some puts at 112 in the Z month? Let us paper trade it.