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Hello brownsfan,
I think the energy market ( Oil, NatGas) is a great place to be for profitable traders...much more interesting than most indices and currencies. However, regarding the risk/reward ratio, I'm not so sure whether oil is better than e.g. the ES.
Moves in both oil and natural gas can be so sharp and drastic that, I'm afraid, no stop loss will help if the market goes the wrong way. I know of a trader who almost lost 6k USD per 1 CL contract in one single sharp move when buses in London where bombed ( don't remember the date). He told me he did have a SL in place...I know that on the same day I was following the ES, it would have allowed you to get out of the down move with much smaller losses.
I personally would not want to trade CL with less than 7-8 k. These major events are rare, but they do happen, and if one made use of the low margins offered by some brokers one could go bankrupt pretty easily in a matter of seconds.
But nevertheless, CL is great...
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Mars - We can make that same argument on ANY futures contract. Just ask anyone that was trading the ES, YM, NQ, etc. on Sept 11, 2001.
Drastic world events can punish (or make) you. By no means should anyone trade in anticipation of this, but the bottom line is - while your friend lost $6k, someone made $6k. Don't forget that other side of the coin. And if you are afraid of a worldly event effecting your trading, I suggest getting out of this biz now. Sooner or later, another bad incident will occur. Not if, but when...
Looking past these unforeseen and unpredictable events, the CL was a great week of trading for myself. I honestly cannot believe the points I took home this week. Today was by far the worst day of the week and net pts was 61.63 after commissions and fees. At $10/tick, not a bad day of work, but the absolute worst day this week for me.
In the end, I compare my results to the ES. 61.63 CL pts = 12.326 ES pts. Could I have made 12.326 ES pts today? Perhaps. But considering today was the worst day this week on the CL, the ES can't touch other days in terms of net points per contract.
For me, the real question right now is - do I focus 100% on the CL where I can trade less in terms of number of contracts (and much lower commission costs as a result) or trade the ES, but in much higher increments. If my goal is to equal the returns in the ES that I am seeing in the CL, the ONLY way to do that consistently is to increase the size I am trading and only compare actual net dollars.
Point being - I can trade less contracts on the CL, pay quite a bit less in commissions and make more money.... This would free up SO MUCH trading capital that I wouldn't know what to do with the excess cash!
I can accomplish my income goals with less money tied up in a futures account that earns next to nothing when the money is sitting there...
Some food for thought.
Thanks for stopping by to the thread Mars and welcome to the board! I thought I was discussing the CL w/ myself.
