November 20, 2019

Crude Oil Waiting on the Break

Gain Better Control of your Strategy Engagement with CT’s Technical Event Model

As an example of strategy engagement, the use of the popular and highly reliable horizontal triangle. One of the main reasons some traders don’t do well in the markets is their inability to wait. A key strength of all great traders you will ever read about.

Please, if you know an active day trader who trades daily and is doing what Soros has or what Trout has or Dalio let me know, I will give you a free subscription to VR for 6 months.

In any event, this chart of the crude shows the horizontal triangle we have been watching for a few months. First, Contrary Thinker is not engaged in trading Crude here. That does not mean some systems are not working and some that are working very well.

Key I-T R&S Zones for break

The following numbers are from my %BB-DBR trading Crude Oil. Over the last ten years made 325k with contract management. That’s all good, and that is how the groundbreaking systems development began back in the ’90s and progressed into the first decade of the new millennium.

Today, however, system trading is more sophisticated. It is more like the way most investors and traders think anyway. They make a forecast, and after they have a forecast, they believe they come up with a trading plan – a strategy – to take advantage of the forecast. They typically do this without a highly accurate dynamics forecast and have no timing for the forecast.

Monthly P&L from %BB-DBR Taking All Trades on Crude with TEM coded

The system trader has got to be in it to win it. They are taught to ride out the bad times to be around for the good and use after the fact money management or account size to control risk.

I am talking to advanced and experienced advisors and capital managers, so no need to go in-depth here.
Returning to the pending break by Crude oil – it could go either way. The public bloggers on the bear side say that the Saudis going public with Aramco will bust of OPEC further and be deflationary.

The bulls say that “US sanctions on Iran continue to choke the Iranian economy. While there have been no provocative incidents impacting the oil market in the Middle East since the mid-September drone attack on Saudi production, that could change in the blink of an eye. At the same time, the December 5 and 6 OPEC meeting could cause the price of oil to rise if the cartel decides that the current 1.2 million barrel per day production cut is not enough in the current environment.”

The reasons why will become clear only after the break, so three is no need to speculate. Rather, Contrary Thinker will look for pre-conditions that suggest a strong force and one-directional movement. The above chart on the I-T weekly bar and the S-t daily bar both support a breakout to pick up a following. They are both reading a TE#2.

Scalper Trading Either Side w/o TEM Filter provided by Volatility Reports

The point is to trade your strategy as the market is going into its best context for your strategy. If its an anti-trend or reversion to the mean type, it may streak best after a panic high or low; if it’s a breakout system, it may make the best profits after a TE#2.

The next table is a trend following systems called Fast Ed and with certain code updates Notorious. The results are net profit twice as better than %BB-DBR as you can see, while the risk is higher per the profit factor. They both use the same contract sizing system and limits, plus the net cost is factored in the same.

Without filters, in the code, you can see the variance in the month to month. But we are not interested in trading it every month or every week for that matter. There is no reason why a trader or a capital manager should trade for an average. The average trade-in each system is the same at $132.00. The average monthly return on %BB-DBR is $3k and $8k for Fast Ed, because of the increased activity.

Monthly P&L from FastEd / Notorious Scalper Without TEM in Code


Here again, why should one risk the increased activity to double their potential monthly average profit? When there is a Macro Filter that will tell them to engage the systems and when to stand aside.

What Drukenmiller wants to trade is the aberrant, the months when the strategy profits reach 3 times the average monthly profit, and from 2011 over 100 months, triple of the average happened 14% of the time. This idea is also grounded in the notion that 80% of your profits come from 20% of your trades. It is not grounded on transactional thinking or trading for an average daily.

Membership has access to these strategies and TEM model in their DropBox today folder <Members>

Take advantage of Contrary Thinker’s Membership today.

Great and Many Thanks,

Jack F. Cahn, CMT

Copyright 1989-2019

Contrary Thinker  1775 E Palm Canyon Drive, Suite 110- box 176 Palm Springs, CA 92264 USA. 800-618-3820 or  25/1 Poinsettia Court Mooloolaba, QLD Australia 4557 614-2811-9889

— Contrary Thinker does not assume the risk of its clients trading futures and offers no warranties expressed or implied. The opinions expressed here are my own and grounded in sources I believe to be reliable but not guaranteed.

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