Best technical approach to trading calendar spreads in Oil

ramo88

Junior member
34 1
I have traded butterfly spreads successfully with bollinger bands and RSI and stochastic indicators. I want to make more money by trading calendar spreads.
Today I looked on my charts (CQG) and tried all sorts of technical approaches;

candle sticks trying to identify support and resistance

market profile/spread bars on daily for overall trend and identifying overbought and oversold

both candle sticks and spread bars on different time frames with bbands, e.g. 30 mins, 60 mins, 5 mins

When doing this I can't seem to find a decent technical picture to identify support/resistance levels and general overbought and oversold. Also when using bbands and rsi its not like the butterfly spreads, back testing shows me when I would usually go long based on those indicators it just kept going down and no real entry for shorts came up, I went as far back as Jan 2012.

Any tips and guides on intra-day trading cal spreads in brent and wti? what is a good technical format to identify decent long/short position without going offside?
 

DM86

Junior member
15 0
Market Profile? CQG offer this for free (i think). I know somone who trades spreads and uses this to identify areas of price rejection.
 

ramo88

Junior member
34 1
Market Profile? CQG offer this for free (i think). I know somone who trades spreads and uses this to identify areas of price rejection.

Yes after trying a few different charts I decided to use spread bars on daily time frame for the overall trend, add couple of indicators like RSI, bbands and MA.

Then I use Market profile on 30 mins for my entry and exit, staying outside of the value area, looking at previous highs and lows and going with the trend (so if it looks like its on a downtrend looking for a price to go short).

And lastly I have a candle stick chart for the outright front month which I'm trading, just to get an idea of whats going on e.g. if its Brent just to see if its up or down in the nearer timeframe, most of the outright calendars in the first few months seem to follow the same pattern

so far its worked, today i had 5 trades, 4 winners 1 looser taking 2 ticks profit on the winners.

seems to work well, need to start looking at holding positions overnight though to take larger profit like 20-30 ticks, either that or start looking at some 3 or 6 month spread like dec-march.
 

ramo88

Junior member
34 1
ok so update, up until yesterday i was in good profit.

i had 60 winning trades vs 25 loosers and i was starting to add to my positions, going in with 2 or 3 lots and taking 1-2 ticks profit (30-60 dollars per winning trade)

however today didn't go to plan, i lost quite a bit of my p/l , my winners vs loosers went to 60 w and 30 l, and started to wonder if my approach was any good;

wondering what peoples thoughts are on my approach (market profile for overbought/oversold staying away from value area) and using spread bar for overall trend with bbands and stoch indicator

i'm thinking maybe just have the candlestick chart on a 15 min or 30 min time frame simple support and resistance lines and when one looks like its going to break just go with the trend, anyone else do this?

if anyone trades calendar spreads in oil (on ICE preferably) please let me know any decent entry/exit signals you use. i am always getting the overall trend right just my entry exit signals aren't working. would any of you agree with staying away from value area (i use volume on market profile) the value area tends to move throughout the day anyway!
 

addchild

Newbie
3 0
ok so update, up until yesterday i was in good profit.

i had 60 winning trades vs 25 loosers and i was starting to add to my positions, going in with 2 or 3 lots and taking 1-2 ticks profit (30-60 dollars per winning trade)

however today didn't go to plan, i lost quite a bit of my p/l , my winners vs loosers went to 60 w and 30 l, and started to wonder if my approach was any good;

wondering what peoples thoughts are on my approach (market profile for overbought/oversold staying away from value area) and using spread bar for overall trend with bbands and stoch indicator

i'm thinking maybe just have the candlestick chart on a 15 min or 30 min time frame simple support and resistance lines and when one looks like its going to break just go with the trend, anyone else do this?

if anyone trades calendar spreads in oil (on ICE preferably) please let me know any decent entry/exit signals you use. i am always getting the overall trend right just my entry exit signals aren't working. would any of you agree with staying away from value area (i use volume on market profile) the value area tends to move throughout the day anyway!

First, if your only trading calendar spreads I hope you are just trading the calendar products, and not legging in manually.

Second, You should seriously consider why you are trying to apply one piece of analysis to two separate markets..... Your not trading charts, your trading markets.

Third, think about why you are trading the spread, if your reason is to reduce risk to market, thats good. But the real value in trading the spread comes from its ability to increase/ decrease disparity over time, from looking at how many trades you have, over such a short period of time, you seem to be overlooking that. Its something to consider because it will yield better returns, and reduce your commissions.

My best entry advice would be to watch the book on individual months, if one is stronger than the other, position yourself accordingly, and let all the suckers trading front month outright, with too small stops push the spread out.
 

ramo88

Junior member
34 1
yes i'm trading it has a product not going in on separate legs. also yes i'm trading it to reduce risk to market. I can't believe I didn't think about looking at each individual calendar first before entering, however I have done this before when trading fly's and I found that across the curve the individual calendars never really were in the situation of one being on its lows and one on its highs or vice versa for a good long or short. however I will definitely be doing this from now on, just to see if I can find that kind of pattern.

i like what you said about i'm trading markets not charts, and its two separate markets, however technical analysis is all I know, how would I trade markets without it? just on news and fundamental factors? also if you could briefly elaborate a bit on when you said , the real value in trading the spread comes from its ability to increase/ decrease disparity over time, do you mean I should hold of until I see one calendar spread is tight or am I looking for a greater inequality between the two months ? (so a clear difference between a low price and high price in the two months that make up the spread so its a clear short or long?)

thanks !
 

timsk

Legendary member
7,477 2,234
however today didn't go to plan, i lost quite a bit of my p/l , my winners vs loosers went to 60 w and 30 l, and started to wonder if my approach was any good. . .
Hi ramo,
The sentence quoted is the stand out one for me from your post. After a bad day, your success ratio is 2:1. That's pretty good and, if you can maintain it, you should be profitable. If you're not, it can only mean one thing: your profit ratio has gone to pot - you're losing more money on losing trades than you're making on the winning ones. A lot more!

Reading between the lines, I suspect your problem isn't to do with TA, indicators and market profile etc., it's a risk and money management issue. I might be wrong, but the impression I'm getting is that you don't know when to exit your trades; either for a small loss or, hopefully, for a larger profit?
Tim.
 

ramo88

Junior member
34 1
you couldn't have pointed that out at a more appropriate time, my ratio of winners vs looser has got worse since the beginning of this week and I took a step back yesterday and realized its time to try something new. your feedback and previous feedback put together should work, i am going for a 1 tick loss max (where as before it was 3 tick offside then pull out of trade) and I am going to try and trade less, I seem to want trade as soon as I switch the computer on. I am now going to wait and wait until I find one of those calendar months at a peach of a short or long.

Also i am going to try and ride the move rather then go for a quick 2 tick profit.

if any can add more about the 'trading markets not charts' that would be helpful. also if you have any info about the correlation between calendar spreads and the outright front month calendar movement that would be helpful also!

ill keep you posted, thanks
 

ramo88

Junior member
34 1
(if anyone has any contribution to my last question on last post please add, for benefit of everyone not just me!!!)

UPDATE: my week was terrible last week, when things weren't going right I felt I couldn't trade any longer, like i wasn't cut out to trade etc. Then on Friday i had an ok day, the best bit about it was I got that buzz back, that fire in the belly that makes you enjoy trading. I had no losing trades, taking 2 tick profit. I didn't put on much size and make much money (because of my losing streak) but the trades i was making were right and I got that excitement from trading again.

for the benefit of anyone who is also in my situation (and also feedback from experienced traders) i want to just quickly bullet point the pro's that pulled me through on Friday and should help me have a good week next week!

1) reduced size but let the winners run, so if something went wrong only a small loss and when right just let it go until your happy with profit

2) if the market doesn't prove you right, just get out (don't wait for it to prove you wrong) for more on that read a trading book: Phantom of the Pits

3) Patience!!!!! no need to trade so many times, just trade right!! (as pointed out in by addchild)

4) reduced the amount of calendar spreads i was looking at, rather then looking all the way down the curve I just used 3 or 4 of the middle spreads (Jan/Feb to Apr/May), so they had enough movement to profit well, and I found they moved a lot with front month outright

5) 30 min candle stick chart for the calendar spreads as well as Market profile (testing MPVA on CQG if you have it seems to work well)

6) Stuck at it but at same time didn't get stressed

7) better money management in general (as pointed out by feedback in this thread)

any tips feedback go for it, i will update again one more time next Thursday if everything goes well, if i don't post it means i had another bad week and maybe I need to get out of the industry!!!!!
 

DM86

Junior member
15 0
Hi Ramo, just a thought, have you ever looked into the whole psychology side of trading? Trading in the zone by Mark Douglas is a book I found extremely helpful. It might help reduce the stress and to approach trading more objectively.
 

ramo88

Junior member
34 1
hi DM86

yes i have looked in to it a bit but not a lot (and admittedly should look into it more), and im glad you point it out, i will look into your book once im done with the one im currently reading and recommend: Phantom of the Pits
 

Nikhil Dogra

Member
53 1
I use Daily Charts & Bollinger Bands , MA & do band trading most % of time , spreads are trading more often then trending. Once i determine spreads trend i build bull spreads on volatility supports & bear spread on volatility resistence provided the trend is down. I am still learning this technique , i have so far made only 2 trades once in Copper & Crude Oil & result were mixed. I usually use spreads to lock-in gains,if any & hedge to reduce overnight risk for position trades or before Bernanke comes out for a speech
 
Last edited:

addchild

Newbie
3 0
you couldn't have pointed that out at a more appropriate time, my ratio of winners vs looser has got worse since the beginning of this week and I took a step back yesterday and realized its time to try something new. your feedback and previous feedback put together should work, i am going for a 1 tick loss max (where as before it was 3 tick offside then pull out of trade) and I am going to try and trade less, I seem to want trade as soon as I switch the computer on. I am now going to wait and wait until I find one of those calendar months at a peach of a short or long.

Also i am going to try and ride the move rather then go for a quick 2 tick profit.

if any can add more about the 'trading markets not charts' that would be helpful. also if you have any info about the correlation between calendar spreads and the outright front month calendar movement that would be helpful also!

ill keep you posted, thanks

Trading markets not charts......

watch the book on which ever two correlated markets you are going to spread, so for cl, notice the forward month, is it upticking the same as back month? less than? greater than? Pay special attention to the pit open.


Once your in a spread, the only reason to get out is either an expansion or compression in volatility. Other than that the more time you give it, the more it will grow.
 

moka2

Established member
529 14
Hi Ramo
I am trying WTI Oil Calender spreads on NYMEX are you trading the same or ISE calender spreads are diff?
With 1 month CL spread in demo trial on CQG Trader I found 1 tick profits = $10 - Brokergae + fees

Also what platform you use? which recognises a Calnder spread as single instrument
Does your broker recofnise the margin?
Lets PM if you are interested further

I would
 

ramo88

Junior member
34 1
Hi Ramo
I am trying WTI Oil Calender spreads on NYMEX are you trading the same or ISE calender spreads are diff?
With 1 month CL spread in demo trial on CQG Trader I found 1 tick profits = $10 - Brokergae + fees

Also what platform you use? which recognises a Calnder spread as single instrument
Does your broker recofnise the margin?
Lets PM if you are interested further

I would


Nikhil Dogra: thanks for your reply, i like your approach based on the bands and volatility.

Addchild: thanks for explaining a little further trading markets not charts. This has changed my approach completely.

Moka: I do cal spreads for Brent on ICE. WTI on ICE i think is only worth doing as Fly's , as cals they don't seem to move in a pattern worth trading (or at least I see it like that).

The platform is the ICE exchange platform, free of charge (some not as good as TT, I would agree but still very good). I use CQG also.

As far as taking profit I have disciplined my self to aim for more the one tick, even in the one month spread e.g. Brent Jan/Feb or Feb/March I recently found I could expect 2 or 3 ticks profit from them.

As for 3 or 6 month definitely more e.g. Mar/June I will take 5 ticks easy.

If you want to chat more go for it on here or PM, whichever.

P.S every thanks for feedback and replys, I am not trading this week as I am on holiday but end of next week cant wait to get back on it and make some $$$$$
 
 
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