Article Reviews, Trading

Oil Trading Vehicles and Tips

Scott Andrews from MasterTheGap.com has a video (link here) introducing the oil market. It’s a nice short (16+ mins) video with some useful information.

Why Trade Oil

  • ATR
    • 5-day: 1.77 = $1,770
    • 30-day: 2.05 = $2,050
    • 100-day: 1.99 = $1,990
    • 250-day: 1.95 = $1,950
    • 1000-day: 2.40 = $2,400
  • Comparatively ATR for ES is around 10 – 20 points, which is around $500 – $1,000 per contract.

Instruments

  • Futures
    • CL – Light sweet crude (1 tick is $0.01 = $10 per contract)
    • QM – E-mini for CL
  • ETFs
    • USO – Tracks light, sweet crude.
    • BNO – Tracks Brent crude.
    • OIH – Tracks 25 largest oil service companies
  • Stocks
    • CVX, XOM, COP, OXY, MUR, etc.

Tips on Trading CL

  • Volatile times to avoid
    • 9.00 – 9.01am EST (pit open)
    • 10.30 – 10.33am EST on Weds (inventory report, except for holiday weeks: Thurs 11am EST)
  • Orders to use
    • Limit orders when entering to avoid slippage
    • Stop-market orders when exiting to make sure you get filled
  • Track
    • If for any of the first 3 contract months, the price trades more than $10 away from the settlement price of the previous day, Globex will halt for 5-minutes in all contract months.
    • Each monthly contract ceases trading on the 3rd business day prior to the 25th calendar day of each month (usually on the 19th or 20th).
  • To do
    • On winning trades, let a portion run and trail your stop.

-END-

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