Some observations on scalping Crude

Discussion in 'Commodity Futures' started by gurucandidate, Feb 25, 2007.

  1. I've been trading ER2 most recently but seeing that the way Crude is bouncing around during most days I believe it makes a better VST vehicle and I have left trading ER2 or the other indices for now.

    On first thought one would guess that because of all the streaming internal statistics published about the indices they would be easier to trade but most of the time when a move tries to start it gets chipped away by arbs or resting orders.

    On the other hand I sense that there are fewer cross influences in Crude compared to the indices, perhaps cross hedging is smaller part of overall volume or the players are more long/short oriented. Oil is the dog and not the tail that wags the dog.

    Some of the qualities I like about the ID Crude trading conditions (and I mean the electronic contract):

    Very active with size on both sides Pre. and Aft. hours as traders from around the world slosh in and out.

    Great range if one wanted to hold for a swing and it can run seemingly uninterrupted fairly often.

    If commercials rule the market they are not always there because they are incredible swings during the day that could not be explained by fundamentals - or are they shaking the tree?. So overwhelmingly intraday dynamics rule.

    When it gets hectic, which I prefer, it can zigzag 10 points and more at terminal points of swings within seconds and for some time so that one has a chance to take back fading trades.

    There are so many of these intense conditions that a scalpers can do their thing and do not have to participate in the market when it is not moving.

    The size of these zigzags (even bid ask) fluctuations to commission (at IB 3.62 RT unbundled) is very favorable and the number of opportunities per session is also very favorable.

    I trade from home on an IB and TS platform without any news or fundamental input using my own mix of canned indicators like oscillators and volatility bands laid over some tick bar and volume bar charts. The shortest is a 100 lot bar chart, the longest is a one minute bar chart and once in a while I glance at an other page of 5, 15 and 60 min charts with similar overlays.

    The purpose of the charts is to help me sense the area where a move is overdone and seems to stall and start fading it sometime scaling up and down, basically acting as an off floor market maker. I am always out by the time a good counter move starts.

    I do not use stops and of course I get run over once in a while but there are so many opportunities that I can recover fairly quickly.

    I would love to hear from other traders about their Crude oil trading experiences and styles.


  2. tyrant


    What is VST? And do you scalp both directions or only in the direction of the dominant trend? How many trades do you get per day? What is the symbol in IB?
  3. Tyrant,

    vst = very short term (it is not really scalping) Being off the floor it may be difficult to just trade the bid/ask spread

    IB symbol cl (full contract) 'CLJ07', mini size qm.

    I trade in both directions, only the cl. The overall trend does not seem to matter. I do better when I focus on the immediate market action and forget all externals and do not have an opinion beyond or anything to hang on to have one.

    Most trades are at or around the end of small intra day swings when trading is busy which may or may not be with the overall trend. ( I visualize this as a brawl at the fringe of a battle. Ideally I get involved when one side is losing momentum and is ready to get exhausted). I do this type of trade 10 - 25 x per day.

    In a smaller number of instances I grab some or sell some if I sense quick extension type move (maybe ahead of a fat number on the bid/offer stack on the TS Matrix). I never feel comfortable doing that and I am immediately out if it does not go. I do this 2-4 times a day. When traders don't seem to be running ahead of that number and price is pressing against it it is a good indication that the market will move through that.

    In an other type of trade I buy or sell into a move on a pullback on seemingly low volume. This is the most dangerous because the action may or may not resume intensity. Sometimes I end up liquidating at a loss exactly at the spot I should start fading (as in method 1 above). I do this 0-2 times a day.

    Once in a while, usually after a good series of trades, I have the need to be irresponsible and take a flier at a breakout point or something and I invariably loose on these.

    I never reverse trades. While I trade for only a few ticks at a time I operate as a sharpshooter at the initiation of the trade and I would loose my orientation if I switched sides. I need a vantage point.

    When it comes to positive negative factors intensity and vibration are the most important. Commissions I pay plenty but are not a big factor because
    one tick almost pays for 3 RT trades. On these trades I try to get 3-4 points.
    Once in a while the market runs in my favor before I enter the liquidating order and there is a nice windfall of 15-20 points but of course to some degree the reverse is true when I get hosed.

    I am a technical type trader with unusual visual acuity but literally no feel for the tempo (this is why I use indicators) but someone with a natural feeling for the ebb and flow of prices could do really well trading Crude for a few ticks.


  4. I've been trading crude for a while. Started with QM, switched to CL recently.

    Great market, lots of volatility and opportunity. I'm not scalping per se...rather, trying to get on board the intraday swings as they present themselves.

    Primarily a technician. I like to try to figure out which way I think the dominant trend is, then position myself on moves against that trend. Give me enough technical evidence though and I'll take a crack at a counter trend move.

    For crude I'm using daily, 30 minute, and 5 minute charts. No indicators. I like to start with a stop of .50 to $1.00 or thereabouts per barrel.

  5. like gurucandidate said this product is great to any system that take advantage of the intraday volatility with low mid-term volatility.

    i've been increasing my trading on CL during the last 2 years and now is my "second" favorite product (my favor is still the ES).

    i hope this post will gather some of the CL traders as its pretty hard to find energy traders out there.

  6. jjgallow



    I visited your blog...I think it is an excellent call!

    I'm just wondering if oil may have lower to drop than that...very difficult to tell. I like to buy on dips, but this is one difficult dip.
  7. lolo............nice blog.............
  8. jjgallow


    I subsribed to your "blog", hehe.

    We'll see how your call turns out.

    It is very similar to my own, minus about one dollar for your low and your high.
  9. How do I trade the cl?

    #10     Feb 28, 2007