Tag: crude oil

Profitable gold and silver – missed USD CAD

A good week with profitable trades in gold and silver. The week did come with a small loss and missed opportunity in the currency pairing USD CAD. Also, we were out of the money for much of the week in crude oil only to grab a brief break-even buy back moment. Overall, a good week.

Silver daily chart: each bar represents one day’s worth of trading. A black bar means the price closed lower than the open. Each candle (as they are called) shows the open and close price and the wick (either top or bottom) shows how high or how low the price actually went between the open and close times.

We shorted silver at the red arrow and we bought back that short at the green arrow. Just over 80 pips of profit for us; a pip is the smallest upwards or downwards movement. (In stocks and shares it is called a tick.)

Gold daily chart:

We shorted at the red arrow and bought back our short for a profit at the green arrow. Gold trades less than silver per ounce and therefore our gold movement this week represented only 30 pips. However, the smaller size is offset by the traders equation: based on probability, our profit target, how far away our stop is and the representative amount we’re prepared to lose.

USD CAD daily chart:

Over the last few weeks we went long at the larger green arrow and took our profits at the larger red arrow. We went long again a few days later at the smaller green arrow only to be stopped out of the trade (within a couple of pips!) at the smaller red arrow for a small loss. I then missed the subsequent move up. That is trading. Did I set my exit stop at the wrong place? Maybe. Hindsight is a wonderful thing, and a few more pips below the moving average would have been sensible. But my overall judgement was correct, in that the price was going to go up – and I take confidence from that.

Crude oil daily chart:

My best trade of the week without making any profit. Let me explain. We shorted at the red arrow and were out of the money all week to the tune of 200 pips at one point. We bought back our short at break even price at the green arrow. Best trade because although we were out of the money we did not reach our stop position and we managed a break even price. Ready for the next one!

May 21, 2016
gold and silver – are prices ready to drop?

Copper – An uneventful week for the commodities. All except copper which moved down without us and with gusto. Copper, however, had an unclear read on the COT (often the case with copper) and an unclear read on the daily charts. Therefore we are correct to be out – as to stay in would have been to rely too heavily on hope.

Crude oil and USD CAD – We hold a small position on crude oil short. But a 200 pip climb is likely and at which point we may add to our shorts. USD CAD, which often reflects a delayed but exact opposite price movement to crude oil, shows a clearer picture. Too much reliance on the difference between these two charts (crude oil and USD CAD) is, however, a ‘chicken and the egg’ question and should be considered but not relied upon.

Gold – Having taken some profits (short) from gold last week we continue to hold a small position short. Expecting to add to shorts anytime this week. Net position of the commercials remains at a 5-year low. This will provide great momentum to a drop in the price of gold if gold price per ounce falls to the $1,200 region.

Silver – Similarly with silver. We took some profit last week and continue to hold a small position short. Looking for a price climb to $1,730 before adding to shorts. Silver, however, has an even more dramatic picture on the COT as the net position of commercials is at a 10-year low. As with gold, any significant reduction in the price of silver will probably result in an exaggerated acceleration short.

Intraday strategy – As an aside, much work has been done this week developing our short-term momentum strategy (namely using GBP USD intraday charts) on trading range breakouts and subsequent channels. I know this doesn’t make a lot of sense to the investor, but to a trader it is a high probability strategy with measurable risk and reward. And possibly the most lucrative of intraday strategies.

May 14, 2016
We take some profit from gold, crude oil and USD/CAD

Until now we have traded the commodities: gold, silver, copper, crude oil and USD/CAD on a weekly basis. That is referring to weekly charts and a weekly COT report. We have also, as discussed last week, considered introducing the fund to intraday trading.

Each of which (weekly and intraday) are rather on the extreme. On one hand, we have the overly slow weekly chart market, and on the other, the rather demanding intraday market.

The balance for the fund is daily charts. Why? …weekly charts are emotionally difficult as we see good profit generated only for that profit to disappear as we remain invested in order to reach our target. There is no compromise here, because to take profit before a target, unless our premise changes, does not provide a traders equation (that is: the trade had more risk than reward). Over the longer term this would be a losing strategy.

Gold and silver have emphasised this over the last few weeks where they dropped in price to provide us with good profit potential, only to extend higher than I considered.

Daily charts, rather than weekly charts, usually means tighter stop positions and therefore lower risk, but in contrast our targets are shorter. Timing wise we are in trades for a week or three rather than several months.

The COT suits the weekly charts, but often goes against my daily chart readings. This of course happens at all levels of chart, for example, the difference between the daily and the 4-hour chart or between the 5-minute and the one-minute chart. However, I report weekly and to have a profit at the end of one week only to know that profit will go away as we wait for the bigger (targeted) profit seems emotionally foolish.

With moving to daily charts, our targets are closer and therefore we can take profit more regularly (if available) and wait for the next entry. This means that we will occasionally miss the big move – but trading is rarely perfect.

This week we took profit from our short in gold as it sank from its high of the previous week – and before Friday’s monthly non-farm payroll brought it up again. Also, we took profit from a short in crude oil as it came down over the week and from our long in USD/CAD as, conversely, it climbed nicely over the week.

May 7, 2016
Gold and Silver finish week on a high

Silver finished the week on a strong move up. Silver is at, or slightly above, a three-year trend line. The COT shows the net position of commercials at a multiple year low; meaning the majority of commercials (the big buyers and sellers) have short positions on silver. As do we. Difficult to hold through, but that is the strategy.

Gold provides, as it so often does, a similar picture to Silver.

Crude oil ventures up towards the position suggested on my charts last week. A possible short on crude may present itself this coming week.

USD CAD had little movement in weekly chart terms.

Copper dipped early in the week and gave us a reasonable out position. Copper reversed back up by the end of the week as anticipated.

The strategy on commodities is to go long or short reasonably early based primarily on commitments of traders (COT) information and supported by analysis of weekly charts. We use weekly charts as that corresponds to the weekly COT release. The COT is released UK time late Friday evening and is based on the previous Tuesdays collation of information by the CFTC.

This strategy often calls for a significant period of time, several weeks or even months, where the trade is out of the money. Treat the COT as turning a large tanker ship analogy – it ain’t quick!

To balance this ‘slow’ strategy we’ve decided to include a portion of the Slow Trader fund in our intraday trading. That sounds fancy, but is just a way of saying we trade with charts that are incorporated within the day. In our case 1, 2, 15 and 60 minute charts.

In this instance we take as many as 9 to 15 trades a day and normally complete all trades before the end of the day. I’ll discuss our strategies for intraday trading in next week’s blog.

April 30, 2016
Copper, Gold, Silver, Crude Oil and USD/CAD this week

Copper has had a strong week and finished high. Silver in particular has spiked up. Gold also increased but finished the week more or less even. Crude oil has finished the week reasonably strong. USD/CAD is still some way from turning up and will need careful management.

Here they are in slightly more detail:

My premise on Copper has changed. Copper, I feel, is some way from a big turn down. I would consider a small increase in price before a drop to our low 2 weeks previously – and then a possible climb. We will look for the best price to exit our copper trade.

Silver has had a dramatic couple of weeks. Two strong weekly moves up taking silver from the one year trend line to the, higher, 10-year trend line; indeed, the price of silver bounced exactly off this line – marked with a circle. Always difficult to short when everyone else is long. But that is exactly what we did. Of importance, and supporting our case, the COT for silver shows commercials at an 8-year record with the number of shorts compared to longs. Hold onto your hat!

Gold has not been as dramatic as silver. Up in price all week, gold finished low for the week supporting our prediction of gold progressing further down in price over the coming weeks.

I’m a supporter of a drop in price again in crude oil, but it may take its time. Price possibly getting to somewhere marked by the red circle. For now, we remain on the sidelines.

USD/CAD price mirrors that of crude oil. Therefore, a trade on both is double the risk and a significant consideration. As with crude oil short, it is early days to consider USD/CAD long. A turn somewhere in the green box however is a good probability. But risk reward is excellent when we catch a trade early. Probability is the other major player in the traders equation; moreover, good management of early trades is essential.

April 23, 2016
Trading methods that suit
A serious trader or investor has to use a method that they understand and that gives them an advantage, an edge – no matter how small.

That method, or way of trading, has to suit the traders personality. The method could be fast-moving, lower time frame, or slow-moving, higher timeframe. Or a combination of both.

Emotionally, the method has to suit too. For example, most traders are comfortable trading relatively large positions on slower moving, higher time frame trades such as daily, weekly or monthly charts; however, are less objective with such trades on lower time frame situations such as intraday (day-trading) opportunities.

Once we sort our emotional tolerance we then need to consider our ability to manage such trades. Do we have the time and the skills necessary to trade lower time frame situations. This is where a trade entry and exit on say a ‘swing’ trade can play out in 10 chart bars or less – which on a 2-minute chart is 20 minutes. The same trade using a daily chart would take some 2 weeks.

I use three clear trading methods with clear time frames. I feel that in each of the methods I have a small edge, and that is vital. The methods are:
1. 30-year investing using detailed fundamental analysis of company figures. I’m primarily looking here at finding a company that is selling at half price or less and one that has been consistently excellent for many years (usually 10 years). The company, importantly, needs to be a company that will still be here, and profitable, in 30 years. The calculations took Nick and me over 9-months to develop.
2. I trade gold, silver, copper, crude oil, treasury bonds and USD/CAD both long and short, and only trade on very specific signals. Each trade is held for several weeks. This is where I mainly trade the Slow Trader fund. The strategy here is sound, tested and profitable.
3. Intraday trading of any stock, commodity, index or FX that suits – my favourite is GBP/USD. Skilfully, managerially and emotionally intraday trades are the most difficult. Intra day is also immensely time-consuming and takes many years to become consistently profitable.
You will notice that each method avoids the market crash timeframe of 5 to 15 years. Where most investment and pension portfolios are positioned. Yes, the 30-year method will go through a few crashes during its investment period, but over 30 years the crashes simply provide a ‘dollar-cost-averaging’ opportunity to invest more. The only important crash in the 30-year method that is of concern is the last one. I appreciate that as its 30-years it may not be me making this decision!
April 8, 2016
Our medium term strategy holds good, for now

Here is a snapshot of our (open) results for the last week. I won’t normally show this detail as it can be misleading when we have a mix of recent and longer term open trades. But as all our trades have similar creation dates, I felt it was okay to include.

We have a medium term strategy for these trades. Meaning from 6 to 12 weeks, we are 10 or so days in. Part of the strategy is to open the trade early. If an early trade is not close enough to the extreme (a top or bottom) then we will manage the trade to achieve better entries. Being early is difficult for many as it is nearly always contrary to popular opinion. Also, being early can provide excellent gains only to see those gains retrace to a loss – which is emotionally difficult and the reason why many traders cash-in too soon.

By early trade, I should mention that we should also not be unreasonably early (it’s never that easy!). Patience is still key. For example, I think, a short in crude oil, currently, is too early. Crude has started to decrease in price this week from a recent up; but to take crude short now is premature. The picture is Similar for long-term treasury bonds that have a potential near term short opportunity.

April 1, 2016
Slow Trader Fund Update

Slow Trader is now closed to any new funds until next year. Here are the amounts:

For the sake of simplicity, percentage gain or loss refers to original funded amounts.

We are now ready for 2016. Our attention this year is on gold, silver, copper and crude oil. We will also trade from time-to-time the SPDR S&P 500 ETF fund (all sessions) and currency: namely the Euro against the US dollar. We may trade the occasional stock.

We have an excellent short signal developing for silver. That is, we consider silver will drop again in price. Signals for each of our commodities happen no more than a couple of times a year. Therefore, when we get them we need to take full advantage.

The S&P and EUR/USD are not cyclical like the commodities – therefore we will trade these via lower time frame charts (one or four-hour chart and, occasionally, as low as the 15 minute chart).

Commodities are traded through daily charts and in conjunction with the COT report.

For those building funds for grand kids, or simply looking to buy the Aston Martin DB11 – then here we go!

March 5, 2016
Weekly Diary – Slow Trader Fund

A week of lessons and some missed trades.

A few areas that I’ve traded this week have been disappointing. Not by judging the trade correctly, far from it, that has been good, but by being stopped out too soon. A novice trading error possibly. It’s a great lesson to take forward.

Here are the trades in question:

Silver. We had a good ‘short’ signal for silver. Both on the chart and the COT. The COT was a little early, so I set what I considered to be a good size stop. A stop is the exit point, the point at which we get out and accept our loss if all goes wrong. Notice on the chart below how the price climbed to almost the exact position of my stop. A stop twice this distance with a reduced trade amount was the answer. We may have a second chance if price retraces as I’ve indicated with the blue arrow.

Notice the COT below for silver. It is at a 3-year low shown by the blue line. Once this turns up, and remember that the COT is big picture only, this will support a short for silver. Gold has also come down with a similar, although not quite so pronounced, COT picture.

EUR USD. The currency pairing of EUR USD is one that I trade day-to-day. Notice how volatile this currency has been of late. I have provided the 1-hour chart to illustrate this by showing several recent spikes up.

The spikes may not look like much, but to a day trader (trading an intraday chart) they are a challenge. Again a significant stop distance (about 40 pips) is necessary. However, this makes for difficulty achieving a traders equation of 2:1 on a 40% probability trade, which is the minimum requirement for most swing trades.

Crude Oil. A wide trading range has developed for WTI. The Price of WTI moved down to coincide with the top of the first daily breakout. An expected phenomenon . The (buy) signal, although bearish on the daily chart, was good in hindsight; however, I will look for a second entry opportunity to go long if price retraces back to the lower trend line and again provides a good buy signal. After that, I’d expect price to climb to the top of the channel that I’ve drawn with a 40% or 60% probability of ascending or descending respectively.

We remain in Ashtead Group PLC with a target shown by the blue arrow below.

Finally, A reminder that Slow Trader values will be provided every first Saturday of the month.

October 30, 2015
Weekly Diary – Slow Trader Fund

Ashtead Group PLC (AHT) was a good buy for us, so far. The buy was at the bottom of a trading range, as we can see above. This has a 60% probability of climbing to, or near, the top of the range indicated by the target arrow. Of course, there is a 40% probability that the price will break higher from the trading range top. However, we have taken this for a ‘scalp’ rather than a ‘swing’. A swing would be where we would allow the price to retrace before going (hopefully) up higher. A scalp, on the other hand, is generally a movement from one extreme of a range to another without a retrace.

The picture for crude oil, WTI, has changed slightly from my suggestion last week. The COT, shown above, only works with some degree of sureness when it is in harmony with the trend. The little turn up, that we can see at the very end of the blue chart line above, represents a downturn in the price. That tiny turn up represents about two weeks of price movement. I like to keep the COT on a 3-year chart as I find this best for perspective. COT, we may recall, is big picture stuff only. And, again, is only to be trusted when in unison with the trend. Which, in this case, it is not.

Above, is the daily chart for crude oil. My own thought, is a move upwards soon, as indicated by the blue arrow, to provide a wide trading range. The price tried to turn upwards last week but failed. For another turn up we will need some price action confirmation supported by the COT.

Other activities include an introduction of swing day trades on the FX market in EUR USD. In day trading I find it benefits greatly to concentrate on one market. I scalp and swing in my personal fond on day trades. Slow Trader, for the time being, will be swings only in day trading respects. Swings tend to be lower probability trades, about 40%, but have bigger reward potential. They are also less intense to scalps. We will see how this progresses for the fund and, of course, I will keep you posted.

October 24, 2015
Slow Trader Diary

Slow Trader fund up this week to + 5%.

To report the fund each week encourages trades to be cashed too early to show a profit. That is silly. Therefore, I propose that the fund be reported, whenever possible, the first Saturday of each month.

The diary of trades taken, good and bad, and those trades that are on the radar, will be discussed each week as usual.

These are considerations coming up:

Crude oil (WTI)

We have a buy signal on the daily chart shown above. A 60% probability of WTI climbing to $50. After that the price may descend into a trading range, or may continue climbing for a measured move up to about $55. Whether we hold or not at the $50 line will depend on price action and momentum when, and if, we get there. Also, the COT is in our favour for this trade.

Gold

Gold has provided a measured move up, in agreement with the COT. After a breakout on 2nd October, gold is now in a short term bull trend (a bull channel on the daily chart). It has reached a resistance level, however, and the likelihood is that price will fall back slightly (XAU USD) to $1150. Possibly forming a trading range just above its 5-year low. If this happens, we will look for a buy opportunity if price action and the COT agree.

S&P 500

The S&P 500 has broken above the resistance level that we discussed last week. The ratio has now swapped to 60% probability to the price climbing. Indeed, a new high could result in the coming weeks.

This positiveness in the S&P puts a good light on stocks within the index. We will look for opportunities to buy ‘fundamentally’ good stocks as and when they provide price action buy opportunities.

October 18, 2015
Slow Trader Diary – week 39

We remain just above even. No trades taken this week.

The week was spent trading small amounts with my personal fund (£1 per point in the currency pairings).

This gives me the chance to work through, and live trade, many of the lessons from the holiday modules with small risk.

It would be silly to just jump straight in. Trading is like any other demanding job, you need to work your way back in after a break.

Slow Trader is daily charts and therefore not day trading; however, the day trading techniques I use in my personal account are the same for slow trader with the daily charts. What I do in one day with day trading takes a week or so using daily charts. However, daily charts are more defined to my mind; and, as I trade much larger amounts through the daily’s, I need to be on my game. Daily’s are my prefered charts.

Due to the China situation, both the S&P and the FTSE have seen a large drop since August. That will be reflected in individual stocks and shares of course. I am watching the S&P for a turn.

Commodities to keep an eye on:

Coffee price is at a 10 year low. The COT report supports an increase in Coffee but it’s early days. As coffee price increases we can look to see what effect this has on coffee companies such as Green Mountain.

Gold is at the same price that it was in 2009. Gold price remains uncertain. The COT is a buy and gold shot up yesterday in reaction to the US nonfarm payroll monthly report. From our point of view, however, gold is now a wait and see.

Crude oil is, as we all know, at a significant low. The COT is at a minor buy stage. However, the trend down for crude is so strong we would need to see an established move up before considering buying. Most amateurs will buy crude thinking it can only go up…..not sure about that one. I certainly would need to see evidence first before committing. Okay, we miss the very bottom and therefore maximum gain, but to try to find the bottom is very weak in terms of probability, actually it’s foolish.

Currencies:

Those not thinking that we live in a global economy should have watched the nonfarm payroll at exactly 1.30pm yesterday. The results were not favourable to the US and most major currencies (including the S&P) moved, simultaneously, the price difference of a big trading day in less than a few seconds. Eye watering stuff.

As a trader the above shows the importance of knowing the big event news item times. I do not trade the news, for me the probability of getting it right is too low.

October 3, 2015
Slow Trader Diary – week 35

We are open with gold.

Broker charges for the week were a credit of £9.48.

Here’s our gold trade:

Our target is in the region of 1212. This is in-line with the COT and if the present Up continues it will nicely form a recent Up (or recent trend upwards). However, as we have seen this week, the market remains volatile.

Of the other trades we considered earlier in the week:

Silver moved down lower than expected, did not provide price at a level I could determine. So no trade.

NZDUSD remains a possibility to go up briefly. But it is presently stable below its low of recent weeks. It may move up soon. However, this is an advanced trade as it is against the big trend and is without a recent Up.

GBPUSD, having been quite stable through the initial turmoil of the week, just blew down. It may turn at the 15350 region or continue down to as low as 15190. I’m less convinced of this trade. It has, for now, become choppy which always makes for a difficult read. The COT is still a buy but is weakening, we do not have a recent trend, although the mid trend remains up. Only excellent (daily) price will convince me to take GBPUSD at the moment.

EURUSD is approaching our predicted bounce point. However, the COT is about to turn and we are all aware of the volatility presently associated with the EUR. My own thought is that the bounce could happen but it will be short lived. Price may turn down again before the previous high thus establishing a recent Down (or recent down trend).

WTI, or crude oil, bounced off its lower stop this week. This move is gently supported by the COT, nothing dramatic for the time being. Too early to decide, but it is on the watch radar now.

Finally, the S&P and FTSE have moved up slightly, but the roller coaster might not be over yet.

As I’m away for a few weeks the next diary will be 26th September.

August 29, 2015