Crude Oil Mini trading strategy (trend with hedging)

[path.finder]

hi all,

just wish to share a strategy on crude mini that i have tested a few months back and made good returns. due to withdrawal from my account for a family trip my balance in commodities is way too low to get back into it so i am presently not into it right now.

why mini crude - because if you do test live - you will be testing it with minimum risk. (minimum two lots on nrml margin in account)

please do not treat this as an affirmation from my end regarding the success of this strategy and learn to treat every new trade set up with trepidation and extreme suspicion. backrest it on your chart set up and only then go with the minimum risk to test live if it meets your criteria in the backrest.

so here it is the strategy:
- we look for a strong trend

not the first question that pops out from a newbie is this - how to identify a trend? (from a day trader/ short term trend perspective)
it has no definite answer and there are several ways to go about it - but i will share how i go about it.
open a naked chart and select 1 month. layover the 20 / 50 and 200 ema on the chart. then begin to note the ema crossover and price candles positions wrt to 20 / 50/200 ema.
20 ema over 50 and this above 200
next the ema's must be pointing close to the two o clock hand of the clock. ideally all three - 20, 50 and 200 but on the minimum at least the 20 / 50 ema. in this case the 200 may be close to flat ie say just short of the 3 o clock hand with a slight upward basis.

if the signal is bullish note that down.
repeat the same with 1 month / 1 week / 1 day / 1 hr charts (4 time period charts)
ideally all the above four charts must show the same trend. ie short term / mid and long term (from a day trader perspective)

now that we have identified the trend - time to enter the trade.
open the 5 min chart and layover ema 5/20/50 ema as well as cci (i use default value here)
wait for ema 5 to test ema 20 and confirm it has been rejected by candles / cci indicator before you get into trade. trade trigger is as soon as price is rejected by 20 ema. (this lot will be on nrml)

put a stop loss a point or two below most recent low and use trailing stop loss thereon.

now sit back and let the trend do its job. now after you are in the trade when the 5 ema tests the the 20 ema you are on standby. if a new candle is formed below the 20 ema you go short on a new lot (say you are long on the original next month mini lot - you now go short on the current month mini lot) . if the breakout was false you square off the position when it is reverses and clears the20 ema and candles/cci confirms that the trend is back upwards or bullish.

let me explain slowly for newbies:
trend - bullish
buy next month mini lot on nrml when 5 ema is rejected by 20 ema on 5 min chart
now go to 15 min chart and let 5 ema test 20 ema (price coming down)
if 5 ema crosses 20 ema and new candle is formed below 20 ema on 15 min chart then you go short one lot on current month mini lot on nrml
(buy next month is to give trend time/space to run)

if the crossover is rejected then buy back current month mini lot ie square off the lot when a new candle forms above the 20 ema after rejection. you may lose a few points maybe but it makes no difference as you are riding the trend in one mini lot anyways.

repeat this on each pullback. ie short below 20 ema and square off above 20 ema. leave your origonal lot intact as long as 20 does not crossover the 50 ema. in that case you exit your long trade and ride the trend on the short lot and square off as soon as trend reverses.

ill try and update when i take a trade for better understanding. feel free to discuss the pros and cons of the same.

good night all.

 

[path.finder]

entered trade as per above set up and chart trigger - one mini lot crude jan long at 3775.

now to do the most difficult thing for newbie traders, wait and wait.

Update - Took another trend position (for long term) in feb lot of silver mini a while back on same set up when 50 ema rejected 20 ema at 36996. No more capital in commodities, lol. I just have enough to buy one crude mini lot and one silver mini lot on nrml for hedging nothing to do but wait in commodity and monitor occasionally. Let us see how it goes.

 

[path.finder]

entered trade as per above set up and chart trigger - one mini lot crude jan long at 3775.

now to do the most difficult thing for newbie traders, wait and wait.

Update - Took another trend position (for long term) in feb lot of silver mini a while back on same set up when 50 ema rejected 20 ema at 36996. No more capital in commodities, lol. I just have enough to buy one crude mini lot and one silver mini lot on nrml for hedging nothing to do but wait in commodity and monitor occasionally. Let us see how it goes.

latest update -

mini crude - took a hedge just a while back (ie went short on dec mini lot at 3717 ). max loss locked in at approx 33 pts (3775-3717 = 58 - 25 (pts premium diff bet dec and jan).



silver - booked in-trade-profit and retained position (ie buy back of short lot of 36996 at 36800 = 196 pts profit and re-entered short position @ 36800) so in a sense it is an extension of the original trade.

 

[path.finder]

trade 001 / 002 update:

on a hedge in crude as stated earlier - long jan mini lot at 3775 and short dec mini lot at 3717
on silver mini short at 36800

trade analysis: (@ 1600 hrs approx)
crude mini - 5 ema is testing 50 ema on 1 hr, since the hedge is on - it makes no difference no matter which way it goes, but the 20 ema is still well over the 50 ema. will wait for a clear trend to set in (post inventory) before discarding one of the positions being held. guess inventory will define the trend later in the day. for now - no action required

silver mini - from the 1 hr and 1 day chart the trend is clear bearish so there is no action required and though the 5 ema has been testing the 20 ema, the 20 ema has been respected well in this case, no breach so far and thereby - no action required.

will re-evaluate trades later in the night once again accordingly.



update: (post inventory)

trade 001
crude mini - squared off short mini dec lot of 3717 at 3692.
booked 25 pts profit, trade still in progress.

why was the square off - of the hedge done? - because if you look at the 1 hr chart there is a support zone (last low was at same level as made on 11 dec at approx 1500 hrs from where the reversal took place)
which means there is a possible reversal here or else if it breaks approx 3660 - that break downward would mean that this support did not hold and i would go back into a hedge again as the next support lies at 3610 approx. on 07/dec at 1300 hrs approx.

(disclaimer, lol - i treat support resistances as zones and not lines, so my definition of support or resistance may differ from a lot of others. it works for me so i do thus)

holding original long of 3775 - jan mini lot. crude keeping me awake for now, lol.


trade 002
silver mini - no action required and none taken.

 

[path.finder]

Update trade 001:
Crude in strong downtrend. This way it will break through the near support. So, I'll wait n watch before exit from the hedge which is making profit. Hedge in holding was at 3656. Let's see.
Update, exited hedge at 3614. Will watch trend now and hold on or re-enter.
Update - re_entered hedge at 3620 Dec mini lot short.

Mini silver trade 002:
Was bad on my part not to monitor opening. Shot through the roof,lol. I'll confirm if the trend has set in from the 1 hr chart before deciding to hedge or wait. Nothing but watch for now.

 

[john302928]

Hi Could you please post charts along with your explanations. It would be of great help. Thanks

 

[path.finder]

Hi Could you please post charts along with your explanations. It would be of great help. Thanks

hi john,

shortly i will starting my full time trading in crude in a few days once i transfer my funds and take a few days to finalize the teeny weeny bits of strategy. ill start a new thread for that where the lots will be main crude and 25 pts per day will be the likely target. real time target and stop loss or exit will depend on trade set up. but i will be only taking a trade where i have probable winners and few losers. all i am working on is big winners by trailing stop loss and quick small losers should the trade go wrong. working out to trade from an area of value to achieve this. i prefer a semi naked chart - just moving averages and one extra oscillator maybe. i am just back testing it. most likely i will start the new thread by late evening today or before monday for sure.

basic outline is :-
- crude main lots
- all lots on mis, no holdings / all nrml and no lots on mis / a mix - i am still working on this, lol.
- no of trades as per signal - variable - maybe 2/3 on an average
- no fixed target or stop loss, all variable and as per trade set-up.

ill complete the final checks and post soonest. six months of testing live has been good and i feel ready to dive into the ocean now, lol

 

[path.finder]

trade 003:
(trade 001/002 are still in progress)

had just 23000 cash in commodity account after trade 001/002. just came across a real good deal. was a good area of value and my risk/ reward was good. so i took 4 main crude oil lots on cover order. exited at my pre-determined profit of 5 pts.

just 5 pts i know but profit percent returns on the trade was good.stop loss was 4 pts, target 5 pts.

15:35:35 CRUDEOIL17DECFUT MCX SELL 4 / 4 3673 CO COMPLETE
15:12:01 CRUDEOIL17DECFUT MCX BUY 4 / 4 3668 CO COMPLETE

happy trading to all

update:
trade 001: (as per 1 hr chart)
crude has been testing 50 ema all day and has broken above 20 ema but 50 ema is holding for now. it has been painful quiet so far (untill 2320 hrs).
on the 15 min chart crude is stuck between the 50 ema which is acting as support and 200 ema which is acting as resistance. cci is flat and not in any zone (almost at zero). so its 50/50 break on any side that will happen, when it does - maybe monday, lets see.
no action taken in this trade.

trade 002: (as per 1 hr chart)
silver as per 1 hr chart has been testing the 50 ema, broken above it but has not really been convincing so far. the 200 ema has not even been tested so far. so ill safely assume as per the chart that it sideways for now.
no action taken in this trade too.

lol, on a different note - the gas boys had a great day today - made a killing i guess

good night all.

 

[path.finder]

the back test is going to take much longer than i expected. so ill update accordingly.

trade 004:
(trade 001/002 in progress)
13:04:46 CRUDEOIL 17DECFUT MCXSELL 4 / 4 3696 CO COMPLETE
12:09:34 CRUDEOIL 17DECFUT MCXBUY 4 / 4 3693 CO COMPLETE
trade stop loss was 2 pts, target was 4 pts on stop loss trailing(but decided to take 3 as a change)

now, for the crude oil boys - these trades are a good laugh but for the mini crude boys like us - its 120 points which is huge. Although I take cover orders on crude main I only take these trades when I know I can afford the loss with a smile.
I would not recommend cover orders for any newbie untill he really knows what he is doing. They will wipe out your account if not done correctly, so don't seek inspiration or guidance from these kind of lucky trades.
My fingers are on the exit all the time during the trades and eyes on the candles as well as bid figures.

Taking a short break and going back to the back testing.

Hope your day is going good.

 

[path.finder]

trade 005:

again cover order - but went in for just one lot. (stop loss was 3660 ie 4 pts)
23:01:01 CRUDEOIL17DECFUT MCX BUY 1 / 1 3649 CO COMPLETE
22:54:23 CRUDEOIL17DECFUT MCX SELL 1 / 1 3656 CO COMPLETE

last trade of the day - goodnight all