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brownsfan019

Trading Oil and Gold

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I realized that I have a post on bonds and grains but nothing on oil or gold, so here we go.

OIL

 

Simple enough to understand that in today's time a lot of people are watching oil and there's a number of futures contracts to trade here.

 

Characteristics of the oil markets:

  • Variety of times to trade based on where you are at - can get a jumpstart on your trading day before the indexes even open
  • Can be uncorrelated to the indexes
  • 3 possible contracts to trade
  • When in play, oil will move

There's 3 contracts that I trade and watch:

Note - your broker may have different symbols, I am going off my OEC charts.

 

As always, perform your own due diligence before trading here. Pull up a few charts and see if you like what you see.

 

IMPORTANT: Every Wed @ 10:30AM EST is the oil inventory report. DO NOT HOLD TRADES INTO THIS OR EXECUTE TRADES INTO THIS REPORT UNTIL YOU HAVE EXPERIENCE. Econoday has this listed as "EIA Petroleum Status Report''. I have my gmail calendar setup with a reminder every Wed to trigger at 10:20AM to exit all positions soon if I am in one. Forget this one time and you could pay dearly.

 

 

GOLD

 

Gold is actually very similar to oil so that's why I'm including here. This is also a hot topic lately and there is 1 main futures contract that I will trade here.

 

Characteristics of gold:

  • Variety of times to trade based on where you are at - can get a jumpstart on your trading day before the indexes even open
  • Uncorrelated to the indexes
  • When in play, gold will move

Contracts to trade:

  • GGC - this is the contract I trade as there is good volume here.
  • Mini-Gold - for whatever reason, this has never attracted volume so I wouldn't touch this thing.

 

 

As you can see, there are some similarities between oil and gold but they are 2 different markets that could compliment your trading.

Edited by brownsfan019

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Hi Brownsfan

 

Just a question about correlation. Isn't Gold correlated to the $USD :

 

a>

 

Also oil has physical value related to supply/ demand pressures. I see sales figures and inventories , but I do not see this with Gold , albeit they both are commodities.

 

erie

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Hi Brownsfan

 

Just a question about correlation. Isn't Gold correlated to the $USD :

 

a>

 

Also oil has physical value related to supply/ demand pressures. I see sales figures and inventories , but I do not see this with Gold , albeit they both are commodities.

 

erie

 

erie - the correlation I am referring to is the US indexes, which is what I noted. Since many trade the indexes, I am trying to point out a few markets that are not directly correlated to them. Are there times where things will be in correlation? Sure, of course. There was a time when oil moved up and the indexes moved down. It was almost perfect correlation, but that time has come and gone. Speaking in general day-trading terms, gold and oil do not have a correlation to the US indexes consistently.

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There was a time when oil moved up and the indexes moved down. It was almost perfect correlation, but that time has come and gone. Speaking in general day-trading terms, gold and oil do not have a correlation to the US indexes consistently.

 

Well it remains to be seen, but during 2009 the correlation between oil and indices has been quite outspoken. This does not mean that when equities move up 10%, oil moves up the same amount each time, nor does it imply that if you superimpose both charts you see identical patterns. Correlation needs to be analyzed, and I doubt you can just say "that time has come and gone".

 

Here's an interesting article about the remarkable correlation between oil & equities. It's as recent as from August:

 

FACTBOX: Oil, equities trade at their closest in decades | Reuters

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Well it remains to be seen, but during 2009 the correlation between oil and indices has been quite outspoken. This does not mean that when equities move up 10%, oil moves up the same amount each time, nor does it imply that if you superimpose both charts you see identical patterns. Correlation needs to be analyzed, and I doubt you can just say "that time has come and gone".

 

Here's an interesting article about the remarkable correlation between oil & equities. It's as recent as from August:

 

FACTBOX: Oil, equities trade at their closest in decades | Reuters

 

Nice article FW. Personally, I haven't seen it on intraday charts in the AM session, which is what I trade. Not debating what the article is saying, but for my personal trading on an intraday AM basis, I haven't seen like a few years back.

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Nice article FW. Personally, I haven't seen it on intraday charts in the AM session, which is what I trade. Not debating what the article is saying, but for my personal trading on an intraday AM basis, I haven't seen like a few years back.

 

Well it depends on what your focus is on ... but take yesterday for example, when US indices opened, they rallied up, so did oil. Then later in the day they fell off quite a bit and fast, and at same time oil reversed and fell from above $81 to below $79...

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Well it depends on what your focus is on ... but take yesterday for example, when US indices opened, they rallied up, so did oil. Then later in the day they fell off quite a bit and fast, and at same time oil reversed and fell from above $81 to below $79...

 

Ok, point taken. Sometimes there is correlation on the 2 markets. Sometimes there is zero correlation. And sometimes they are negatively correlated.

 

My original post has been edited, hopefully that meets your criteria.

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Ok, point taken. Sometimes there is correlation on the 2 markets. Sometimes there is zero correlation. And sometimes they are negatively correlated.

 

My original post has been edited, hopefully that meets your criteria.

 

I just found the article interesting, and also from my personal observations, equities and oil seemed to move along in the same direction. What happens after hours or premarket is a different matter...

 

Btw, "zero" correlation is unlikely too :)

 

I'm sure there are plenty of people out there who keep track of how markets are correlated and are much more knowledgeable on the subject than me...

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Oil 11/18/09. Just a quick look at where we stand on the long term chart. We touched the current trend line today about .5 seconds after oil inventory came out. I'll be looking for some major down swings over the next few days unless that trend line is broken to the upside.

 

attachment.php?attachmentid=15509&stc=1&d=1258589610

5aa70f61d2943_gcl11-18-09.thumb.JPG.68f64ab982bad5bef0c09abd2084a489.JPG

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Oil 11/18/09. Just a quick look at where we stand on the long term chart. We touched the current trend line today about .5 seconds after oil inventory came out. I'll be looking for some major down swings over the next few days unless that trend line is broken to the upside.

 

Well, we got that drop I was looking for. Too bad I was on the road while it happened. I love it when the trend channel just keeps showing you where price might be headed.

 

attachment.php?attachmentid=15561&stc=1&d=1258651633

5aa70f636d169_11-19-20092.thumb.png.455c490e718372f8153e4c66835ad0a7.png

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Can someone explain the contract months to me for GC? It seems that right now the front month is the Dec'09 contract, but I've been trying to view some historical charts (Zenfire doesn't have a continuous contract so I have to view historical data for each individual contract month), and I can't figure out which contracts would go with which months' data. For example, looking at data from 8/20/2009 to 8/30/2009, I thought that I would be using the 08/2009 GC contract, but that didn't look right, so I tried the 09/2009...still not right, tried the 10/2009, still not right, until finally I came to the 12/2009 contract, and that looks right. So at the end of August the 12/2009 contract was the front month??? I really wish every CME contract could just follow the 3/6/9/12 schedule of the index e-minis.

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I'll do my best... Today was a good example where I rolled to the GCLF0 contract b/c it was trading more volume. And today was the first day I traded the F0 contract.

 

Maybe you can use that to piece together how this contract works and what to be looking at for back testing.

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Thanks BF. After messing around with my historical data a bit more, I think I have a slightly better grasp of it. In your example though, would GCL be the oil contract in OEC? I'm talking about GC, the gold contract (I think it would be GGC in OEC).

Edited by diablo272

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Can someone explain the contract months to me for GC? It seems that right now the front month is the Dec'09 contract, but I've been trying to view some historical charts (Zenfire doesn't have a continuous contract so I have to view historical data for each individual contract month), and I can't figure out which contracts would go with which months' data. For example, looking at data from 8/20/2009 to 8/30/2009, I thought that I would be using the 08/2009 GC contract, but that didn't look right, so I tried the 09/2009...still not right, tried the 10/2009, still not right, until finally I came to the 12/2009 contract, and that looks right. So at the end of August the 12/2009 contract was the front month??? I really wish every CME contract could just follow the 3/6/9/12 schedule of the index e-minis.

 

Maybe this would help.

Ensign Software - Charts: Rollover Schedule

 

Gabe

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Thanks BF. After messing around with my historical data a bit more, I think I have a slightly better grasp of it. In your example though, would GCL be the oil contract in OEC? I'm talking about GC, the gold contract (I think it would be GGC in OEC).

 

Sorry - yep, GGC is gold in OEC's charts.

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Okay. We are now at the low end of the channel which has served up some great trades so far. Price chopped around the bottom of the range for the end of the day which is suspect in my eyes. In the past, it reversed quite quickly from that area. The most likely scenario would be a break to the upside tomorrow but we could finally break out of the trading channel. The biggest problem is that volume might be lower tomorrow due to the holidays. I can't imagine oil just sitting around between 75.5 and 76.5 but who knows.

 

attachment.php?attachmentid=15786&stc=1&d=1259102717

 

Here is a closer look at some levels I will be watching.

 

attachment.php?attachmentid=15784&stc=1&d=1259102366

 

Inventory comes out tomorrow at 10:30 I believe with quite a few more numbers before that. I forgot about oil inventory last week and I was in a SIM trade at the time. It was like a friggin' candlestick firework show. Glad I learned that lesson on SIM.

 

attachment.php?attachmentid=15785&stc=1&d=1259102495

5aa70f69d0ef1_11-24-20097.thumb.png.7693726045a58cf8ee4cf39d16d6623f.png

5aa70f69d4444_11-24-20098.png.756ceacfd3b24863e20f06bfbfd3a7f7.png

5aa70f69dc6f9_11-24-20099.png.1694a3d54a6764f4c5b63bdf91ca9a71.png

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Inventory comes out tomorrow at 10:30 I believe with quite a few more numbers before that. I forgot about oil inventory last week and I was in a SIM trade at the time. It was like a friggin' candlestick firework show. Glad I learned that lesson on SIM.

 

 

I promise that if you do that 1 time w/ real money on the line you will never, ever do it again. I just hope it doesn't take that for you to remember that Wed is inventory day on oil (most weeks). I use gmail calendar and have certain things programmed in their every week and I get a reminder box pop up to remind me - one of them is oil inventory.

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Just so there is a specific example of this inventory craziness here on this thread I took a couple pics of the before and after the inventory comes out. I am going to watch the DOM more often just before this release because on this one it seemed obvious that everyone was betting heavily on a great upward move which made some people a lot of money. Have you looked into this BF?

 

attachment.php?attachmentid=15838&stc=1&d=1259164985

 

Here is the DOM right before it.

 

attachment.php?attachmentid=15839&stc=1&d=1259164985

 

attachment.php?attachmentid=15840&stc=1&d=1259164985

5aa70f6b51a3f_11-25-20091.thumb.png.4d1faaf957c0b7ac07abb7f8fcfebd6c.png

5aa70f6b55aca_11-25-20092.png.dfe7e246d928b1f9e752bc91d389820a.png

5aa70f6b5ce10_11-25-20093.thumb.png.8271b3e02955ad9bca9b535e0ac8c134.png

Edited by Dinerotrader

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Just so there is a specific example of this inventory craziness here on this thread I took a couple pics of the before and after the inventory comes out. I am going to watch the DOM more often just before this release because on this one it seemed obvious that everyone was betting heavily on a great upward move which made some people a lot of money. Have you looked into this BF?

 

As far as I am concerned, the DOM is useless to trade from. I pointed you to that other thread I made on this very topic and my opinion has not changed.

 

I personally could not get any value from using the DOM to trade from. That means squat to others that can use it. If you can make it work, then more power to you. I just found it a giant game being played back and forth so now I ignore it.

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I wanted to give a little bump to this thread to point out why the oil market should be on your list of markets to consider trading. If you've followed me in the p/l thread at all, you've seen my profitability jump quite a bit lately and it's all b/c of this market.

 

Here's a sampling of some of the moves on Monday, Dec 7th.

 

attachment.php?attachmentid=16391&stc=1&d=1260248140

 

 

From extreme-to-extreme, there's about 323 ticks x $10 = $3230.

 

Will you nail every high and low? Of course not. But what is important IMO is to trade markets where the high-to-low range offers you opportunities inside of that to make money. If you trade a market that is moving and providing 323 ticks worth of movements, you only need to capture a % of that to have a good day trading. When a market is providing such nice ranges to trade from, you don't have to time your entry or exit perfectly to make money.

 

If you find yourself staring at a market wondering if there's something better out there, take a look at oil and see what you think.

5aa70f7c2e273_GCL12-7-09.png.3cc29b0e20b4ec2a5d3eec5320f9b4c2.png

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