Price of Oil - a big problem.....

[Foti66]

So. Mygdonia, did you take the trade you mentioned above?
If you did, did you already puke your position?
If you took the trade and are still holding on, you will feel uncomfortable over the weekend. If something adverse happens during the weekend while the market is closed you might get a gap opening to the upside. That would really suck. Anyway, a loss is a learning lesson, and I am sure you learned a great deal here.

Let's move on. I have been looking at the US 30 yr. Treasury Bonds and have been telling myself this is a trade that Mygdonia's system would do well in. Take a look at it.
1. ADX is lower than 30 meaning the market is not trending.
2. There is a divergence between price and indicator (MACD) noting a reversal is soon to come.
3. You had a wide range down day that opened at one end and closed at the opposite end (this denotes exhaustion) around the tenth day (between our 8 and 12 day window of opportunity). You would have looked to enter in the opposite direction (a long position) on the following days open.
4. If you were trading this market on the system we designed above you would have exited after a couple of days. The market may have not yielded much but it certainly was the right thing to do. If you were to use some discretion you might have simply placed your stop at the low of the day of entry and maybe taken a bit more out of the market.

This is how you pick reversals. You do this repetitively. You seldom get killed. Most of the time you are paying for commissions. Once in a while the market hands you a monster winner. This is what a trading system is designed to do. Over the long run you will be profitable. But you don’t trade this system when the market is trending, and certainly not against the trend.

Back to the oil market. I would be looking for a breakout to the upside early next week. I would only enter the market after it has moved significantly above the current trading range. This would tell me that the market is looking for a new price area to reach. If it doesn’t trade above the market I will not have entered into a position and I need not worry about managing a position.

[Foti66]

What's up Cadmus!?

[Foti66]

OOPS! Sorry dog! Your low was not triggered after all. My mistake. Anyway, everything above still stands.

[Mygdonia]

Hi Foti - how are you champ?

No haven't taken the short yet.

I am still trying to nut around the ADX at the moment and implement it into a trading plan called Foti-007

There is a price divergence of MACD & price and therefore I like the chances of a reversal very soon.

I'll post my ADX indicator soon, but I'd love to see a graphical representation of your ADX system to get a general idea as I do not believe my ADX indicator is correct..

[Mygdonia]

Foti

Does the DMX indicator look right for corn?

If so; does it tell you the trend is up but time to take profits for +DI is about to cross below the 30 day signal line?

[pankration]

Originally Posted by Foti66

Hi Pankration. It is simply something you have not looked into. Designing a mechanical system to buy and sell commodities. Price movement of a commodity is a language all its own. The way the price of a commodity (or stock) is reacting is sometimes giving you a clue as to what it might do next. Through rigorous statistical testing you can seek and find such situations. The above thread is discussing the making of a mechanical system. My thanks to Mygdonia for the questions. It got my juices flowing again. If anyone has any other questions please PM me. I will be happy to answer to the best of my ability.

Thanks for offering to help me understand. I mentioned this to my cousin and he loaned me a book on trading commodities. I have degrees up my ass and I couldn't understand a thing. I guess this explains my GRE results (a test you take for a doctoral program): over the 95th percentile in all language based areas...below the 5th percentile in logic! It's like half my head is empty and that's the part that understands stocks. But I do find the conversations here interesting so I am following them faithfully.

[Cadmus]

Originally Posted by Foti66

What's up Cadmus!?

I dont know ?? you tell me!
I was just trying to put my view on how markets are unpredictable and very nowadays volatile!

[Cadmus]

Besides im not an expert on trading like Foti seems!
Im just experienced at trading on the highest risk factor here in Holland week options on the AEX index!

And companies to that seem to rebound strongely from hard hits on the stockmarket..

The week options ive mentioned are highly volatile and positions held by me sometimes only last a ccouple of hours especially on friday when its most volatile and the expiration time is set on when the us markets open.

I usually hold positions for 2 days..i have sometimes profits of 600/700% or losses that is i'll lose everything in one day..sometimes its gambling especially on the major indexes..but for companies like quarter annual results im usually on the spot..always look at that's what i figure as important if companies are being punished much harder then needed when previous bad results were taken into account and implemented..

As i say again the banks here in Holland still show very healthy figures and are not as bad as in the US!
But they lost to much of its value and are a real bargain right now..


Oil is not my game its not my thing at all, dont uderstand the political situations that hold the straws like China's needs or OPEC discisions that really influence the oil trade..that is not intended for the small player on the markets..on the other hand company outlooks are much easier and much more dependable on..

Just my 2 cents.

[Foti66]

Hey Mygdonia. I looked at an ADX indicator on another site. You are right about the ADX not being above 30. The site I usually use these days is barchart.com (I am not very active these days so I don't have a data feed) but it seems to be giving me a false reading. I should have realized the ADX reading was wrong just by the way the chart looked.

OK, very important lesson here. It would seem that the system is giving a short signal. What should you do? I know everything that has been written about trading systems and trading methods. The popular opinion would be “you must take the trade”, because you never know when the big winner will come. You are after all trading a system that has been tested and should put you ahead of the game in the long run.

Here is what I have to say. Even the most systematic of traders use discretion. Crude oil is in a raging bull market, this alone should tell you to avoid your bearish signals (they are bound to be wrong). The other popular phrase in this industry is don’t listen to anyone and do your own thing. Everyone has opinions and they mean nothing (the only difference here is that I have some 20 years of trading experience. I spent 6 years of my life as a recluse studying and testing markets from as far back as the late 1800’s.). If you decide to take a short and you are lucky enough to gain some profit, take your profit quickly (it is bound to disappear quickly).

Now on to the corn market. You have a trade setting up there. You see how your ADX (blue line) has started an incline, and I am sure it is above 30 indicating the market is trending. The first pullback in price you experience in a market like this has about an 80% probability of going back up and testing the previously established high. Look to try and go long at some point over the next couple of days as the market is retracing some of its recent bullish move. This is what trading is all about. High probability, low risk. I don’t interpret the other parts of the ADX and I think the traditional system that Welles Wilder set up for the ADX is nonsense. Oh, and by the way, 95% of the books published on this subject are nonsense. If you are interested in a few good books to read I can recommend some.

[Mygdonia]

Thanks again Foti.

Yes I'd appreciate if you can recommend some reading material. I only read stuff off the net and program my own stuff.

So the ADX line looks correct?

If so, your entry would be when the ADX line advances through the red line for a long?

...and now you would sit and wait untll the market corrects itself and buy the first sign of strength(?) in order to stay in the trend as the ADX line is uptrending and above 30?

How would you pre empt the retracement levels, by simple fibonacci numbers?

Have you ever traded the Rainbow system in Forex?

I am back testing it now, but there are so many variables in this system that you can not call it mechanical. But I have programmed it into my system and looks very 'colorful'.