WTI Crude Oil (TRENDSURFING - with the help of the model)

Ok, very simple TradingSystem (TS)... for WTI Crude Oil market

It is about SURFING the (down)TREND...
Seems very slippery atm... even Saudi situation haven't been able to put it up for too long.

TREND (at least till the end of OCT) is believed to be (according to my projections) SOUTH:

CONTROLING parameter:
My price prediction model of 10+ years is basically the same, at least CORE of it, regardless of the applied market... But since it has been used on the EURUSD the most... I use it also to assess it's quality/precision based on that chart... So the closer the price is around the violet line (merlins line - output of the model, for this market), the better it works... At the moment, the price is bellow the line which is synced with the downtrend direction, but I do not like that it is like 100+ PIPs below... I would much prefer it to be closer, ideally swinging around the line, even though it was predicted on 25jul19... it is recalculating all the time and it implies that it should hold till the end (of oct)...

Additional info for your help:
CORRELATIONS.. eurusd to OIL.. or currencies to OIL

1. http://www.stockexshadow.com/crude-o...relation-chart
2. https://www.investopedia.com/article...orrelation.asp

TP (not to be greedy but it is also variable, depending on the daily moves, liquidity etc...)..
But I would say like 20-50PIPs change at the time would be good.
Leverage: I would be looking at let's say 10-20:1 Leverage... Again, depending on the market volume, volatility...
SL: I do not want to discuss this religious thing... But I might be open to higher risks than famous 1:1, if the market would indicate some price would need some wider "turning radius" before it reaches the "final destination"
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Questions before entering trade:

1. Trend still seems south or "anything unusual"?
2. Any special news/events?
3. Volume/Liquidity ok?
4. Good "part of the day" (meaning not a STALL but not SPIKEs either)?
5. What would be optimal TP (depending on the daily (past/projected) moves, some fraction of it?

At the moment it is like this...

1. South trends seems reconfirmed, trajectory, extrapolation test ok
2. TP 50 would seem good
3. Not a good time of the day (lower volume), would skip the night, revaluate in the morning
4. Some rebounds atm, would let this roll before Shorting..
5. Controlling parameter (eurusd model prediction vs reality): not good/optimal, 100+ pips under the line...

Current decision: Awaiting for a few more days to see how it goes... Not entering..

Will track this closely and decide by the end of the week if I should open/post/link dedicated TE (TradeExplorer) to this thread so that you can see in practice.
And all this could be automated, I would just be placing it manually atm...

Thank you Auricforecas! Hopefully I can follow this system! Keep it up!

Tnx man! Yeah, some pressure now hehe... Have just set (fresh) live account/TE and linked it.. Will see how the market goes and then decide how much should I deposit and when should I start live trading in this TS... BTW not like the markets atm... For example.. eurusd (controlling market for me - for this TS) is in a complete stall... undecided what it should do after the ISM Manufacturing mess WTI Crude looks SHORT but we have some rebounds atm.. So will let those two play a little...
Might enter by the end of this week or beginning of the next...

Thank you for even responding! I've noticed all of your live accounts, which leaves no doubt, that you are not fooling around! I appreciate you sharing your decision making process in funding an account as well.

I just checked the calendar for today and wow, those ISM numbers were indeed horrendous!

Thank you for sharing your view! I'm playing catch up atm. Good luck compadre!

Tnx man! Just made some sample trade today. 1.5% return so far at 20:1... Hope it will be (at least) like this also in the months to come...

BTW price dropped good (in sync with the system) since the first post, but wasn't sure about the entry conditions at the time.. Situation improved much since then... so I made some sample trade today, on the Live TE posted/linked to this thread... Will keep you all posted.. I expect we will have some firmer "picture" within a week.

I decided to not link TE to this thread unless some of you have some serious wish to do so, if you think this would increasingly add value/credibility...

Anyway, here are my updates... Price of WTI Crude oil dropped rather good since I opened this thread with the TS guidelines...
At the moment it is in somewhat rebound, so we will have to see how far this might go but after that, I would still bet on the SOUTH, at least till the end of this month at which time new extensive general analysis will take place... I believe we might be at "inflection point" in basically all markets... This point would either confirm/extrapolate current trend(s) or be almost a complete turning point... So that is one thing..

The other (general) parameters are as follows, copied from first post of this thread and filled with recent data:

1. Trend still seems south or "anything unusual"? Yes, still
2. Any special news/events? Not at the moment
3. Controlling parameter (eurusd model prediction vs reality): not optimal, about 80 pips under the line (check first post)... It did improve rather good, but not "there" yet...

As for entering trade

1. would wait for this rebound to roll... before entering SHORTs... this should be clear rather soon...

Hi Auricforecas, I'd like to take your trading system for a test drive but I am not sure how to follow it.
Violet line? How do I get this indicator and what does it represent?

It looks like these are the guiding lights to placing trades but I am not sure how to evaluate them. They seem a bit subjective?

For instance what constitutes "anything unusual"? What makes an event "special" and how should I go about looking for them? Right now I think the only one that I can easily judge is volume/liquidity in point 3.

Also, I hope I don't offend or come off as lazy. I see you have a great track record and am willing to collaborate but don't know where to start.

Ok, so the basic of this Trading System is "trend surfing" or "trend trading". So the base of this would be to "know" (estimate) the trend direction... So that would be in short. I have posted my trend direction estimation/prediction in the first post... I believe it to be south (atm - at the moment)... So, one could SHORT (at the time of first post for example) and wait... That would be the simplest strategy... at least until the trend (prediction) changes... As of now, I haven't change my position... so I would still be on the SHORT... We do have some rebound atm however...

But since many of us would prefer to TRADE multiple times instead of just entering position ONCE (for example, at the time of first post in this thread), we have to enter multiple times... So the ideal situation would be to capture the drops in a more effect way than from the single short position. So if the price does drop for like 1%... we could capture much more with SHORT/CLOSES multiple times.. If that would not be the case/expectation, we would just have to enter the position and do nothing until the trend (prediction) changes Also, if we enter multiple times, we decrease our risk (maybe), be out at certain high-impact news, spikes etc... That is one possibility, sometimes it would be better to just enter the trade and HOLD, specially with SHORT... but it unlike eurusd (where you get paid for swaps at shorts)... it does cost to be in the WTI Crude Oil short position... Not that much, but still...

Ok, so there I prepared some PARAMETERS that could/would help when one is deciding whether to re-enter the SHORT position or not..
So about the violet line... This is output of my price prediction model of 10years... I call it the "merlins line". I have been using my price prediction model for 10+ years, with various modifications/adaptaions, tweaks along the way... and I have the longest feedback/history with it... And since the CORE of the price prediction model of 10 years is the same for all the markets I use it for... I test the model quality/correctness on this most tested/calibrated market... So in the first post I gave you this chart and I explained that the price is 100+ PIPS below the prediction... Glad to tell you that the price became closer to it, check the latest screenshot (1, 2). Also contrary to what many people predicted for the week.. So that is a good news, however, price is still 60-80PIPS too low for me to be "happy" with the quality of the prediction. Bear in mind that those kind of things are basically unheard for in trading world Predicting the price so close, in shape, (degree) decline etc... But I use it for quality purposes... Because when (and did many times) follow closely to the predicted (merlins) line... the more confident I am in the model for all markets I use it on (with the market specific adaptions of course)! To sum up, IMPROVED quality (prediction vs reality) but still not at optimal levels (I would consider it optimal when it swings +/-30pips around it, but that would be "movie scenario"

So the next you mentioned is "Any special news/events?"... Well yea, checking the high-impact (red) news... You can use the calendar here: https://www.energyexch.com/calendar.php So obviously when there is high(est) news, anything can crash (temporary) or we have like this Saudi situation on Saturday, the 14th! Obviously market reacted heavily and trading was risky af... specially shorting.. but it latter appeared the DIRECTION would resume and is now below that... So still seem SOTUH but one has to be careful about (scheduled) high-impact news, also when FED/ECB speeks/tweets.. or you know who... tweets...
Can spike you out, so therefore I prefer to enter at more calm position UNLESS I noticed unnatural up-spike... for any of the mentioned reasons.. then of course, might be good times for SHORTING (again)

Btw if you would ask how price prediction model of 10+ years work... I can not help you atm... Let's wait till we get some good record out of it...

And of course, as you mentioned, there is subjectivity, pattern recognition, "feel" of the market... This is hard to automate therefore I would say that without the human factor (me in this case)... it would not work (after some time once the previous calculations wears of... end of OCT in this case... at which point new extensive calculations/modelling will have to be done, again).

And yes, I much prefer LONDON times than US, seems it moves better... but that is only a help not a main decision... although much preferred to roll it when market MOVES instead of painful stall (exposure, to spikes etc...)

And I will leave TP, SL, leverage levels to each one of you, because that seems to be personal choice, almost religious Let's just say that I decided to trade this for the longrun/stability/consistency.. so therefore I am reducing leverage much... but about the price changes... per trade.. it depends on the market dynamic but if I would have to choose, I would prefer to have shorter trades.. meaning... to be done in like up to 2-4hours... so not to be exposed and also, not to pay swaps and/or be in position over weekend, also about this recent weekend incident... And up-spikes are much more possible atm... I think... Would prefer the slow downtrend... for at least end of OCT at which point, re-check...

So hope you get some idea... I will update my TREND views, overall market/trade review etc...

And BTW... I do plan to post PREDICTION maybe... like the merlins line for eurusd, but for OIL, it might not be a line necessarily.. but at least some guiding curve maybe.. (that is very hard btw... could do it for eurusd because I have substantial data, much less for oil aside of DIRECTION maybe and some guidelines...

Also, will think about how to make INDICATOR that would signal the models quality Currently I use the eurusd market for it, if anyone could do it, I can give you the line to by end of OCT... But would just use it manually by then... The simplest would be.. the closer the price is to the violet line (calibrated/tested on eurusd), the better the model (same model that predicts eurusd,... predicts the SOUTH for OIL).. so the more confident I would be to SHORT the OIL And of course, just in case, checking other events (that you can read from the chart also)... BTW.. It is not unusual for some traders to enter some (calm) markets a FEW minutes before high-economics news that was scheduled... specially if trading from mobile.. that is why I would suggest to check

Not at all, tnx for your input...

Market almost back to previous course today... touched the previous south track but rebounded so mar... Pretty much in swing-stall... Indecision, similar to other markets... I think we will get rid of this painful stall within a week.. So we can resume traveling to the (deep) SOUTH

Isn't this a recipe for death by 1,000 cuts? How do we avoid paying spread or commission over and over. I suppose if the system is good enough it will more than make up for such costs as long as we are not churning trades unnecessarily.

Is there a way for me to follow this indicator other than just downloading it directly (I'm assuming you are not handing it out)

Ah ok so monitor the calendar and high impact news and stay out of the market when something is expected to cause large spikes. Is that right?

Sounds like it makes good sense to me but:

How long do we wait for markets to settle afterward? Do we monitor ATR levels of a certain range?

Sounds like a good rule, helps me understand the type of system you are working with too. I probably wouldn't trade fundamentals here but will have to rely on the technical indicators. Seems like the system is most heavily influenced by the merlin's line.

You got all right I will be posting the output of the model, not the sourcecode, yes. Atm I published Merlins line till end of oct.

Btw got out of trade that I was locked in for a week due to stall, can check attached (to this thread) sample TE, might create new TE with target return/DD, if TE(s) will be attached (to this thread) in the future at all, tbd. This one maybe too aggressive/risky...

Although it rebounded (much)... (glad I closed the trade that I was locked in for a week Check attached TE that is linked to this thread (above))...
I am very confident for the original trend prediction from first post... because the quality of my price prediction model improved much! Judging by the controlling/calibration parameter... In the first post of this thread, I gave you this link... It almost touched it today, certainly went into its direction.. contrary to what many expected, specially at least few weeks ago... Here you can find the latest snapshots of the "quality/precision" parameter (1, 2, 3). Which maybe implied that the price prediction model seems to be much more right now... And I use the same (CORE) also for WTI OIL... which would mean, using it, I can be even more confident of WTI OIL going down (south), even though we have this rebound atm...

So quick summary of TS main parameters from first post..

1. Trend still seems SOUTH or "anything unusual"? YES, still south
2. Any special news/events? yeah, some rebound, but nothing serious, will create good sell point so that we can outperform just SELL it once.. it is best for SELL... and then close when it drops.. wait for rebound, sell again
3. Volume/Liquidity ok? good (generally, not prefect this exact time of post though)
4. Good "part of the day" (meaning not a STALL but not SPIKEs either)? well not for this exact time of post, would also wait for this rebound to roll first...
5. What would be optimal TP (depending on the daily (past/projected) moves, some fraction of it? TP at anything at (at least) 53.00 seems almost a no-brainer, but would wait for rebound to be "over"
6. Controlling parameter (eurusd model prediction vs reality): ALMOST OPTIMAL... improved much, just not completely satisfied/confirmed atm... might be tomorrow or by the middle of next week... stay tuned

I won't enter the trade... would wait for controlling parameter to improve to full capacity and done trading for the week... But will most probably enter trade next week, if all goes well...

Great! Check (links/pics from above post).. Happy to inform you that the quality prediction parameter is TOP NOTCH atm... check the latest snapshot of it (back to violet line - output of price prediction model of 10 years... - merlins line, same mode I use for OIL also)... Which means... The confidence for OIL going south again have increased dramatically... Will be fully confirmed next week.. but it seems VERY NICE atm... Do not be afraid of this rebound, embrace it! Because it might give us GOOD starting/selling point Here are the latest TS update, very good atm!:

1. Trend still seems SOUTH or "anything unusual"? HELL YES
2. Any special news/events? rebound, but nothing serious, will create very good sell point
3. Volume/Liquidity ok? good (generally, not prefect this exact time of post though, prepare for next week)
4. Good "part of the day" (meaning not a STALL but not SPIKEs either)? well not for this exact time of post, would also wait for this rebound to roll first...
5. What would be optimal TP (depending on the daily (past/projected) moves, some fraction of it? TP at anything at (at least) 53.00 seems almost a no-brainer, but would wait for rebound to be "over"
6. Controlling parameter (eurusd model prediction vs reality): OPTIMAL!!! just waiting for confirmation next week then I will SHORT it HEAVY:

Very nice... will re-enter the trade next week, most probably.. but certainly if OPTIMAL level of the controlling parameter sticks... The same model predicts OIL=SOUTH...

Ok entered today... controlling parameter seems to be good now, but overall (all parameters combined are) still not optimal.. so I dipped into the market but exited rather quickly.. (entered at too high leverage)... and exposure was too big to maintain.. Looking in retrospect... I massively under-harvested this trade, but still there formed an idea to have this TS (Trade Explorer) set for long-term (stable) returns... so would much prefer to have 25% return at 5% max DD (DrawDown)... At the current setup, there is already -21.6% DD... and yeah, 10.9% Return... Which means... It can still be a good TE overall... at the end... if I continue to increase the Return, but not the DD...

Will decide If either should aim for 100% Return and try not to exceed current about 20% DD... So that would be great also... having return almost 5xDD (RoMaD factor 5... where 2 would be also good, so about 40-50% Return at this DD level)...

So will decide by the end of the month (or a few days or a week, after the halloween, when the FED situation might settle down...) about whether should leave this TE (but reducing leverage, because it is too much risk atm.. was originally designed for much larger return, but also DD...) or transfer the balance to new TE... have it open by the end of the month with ironclad rule for DD not to exceed 5% and with the aim of having about 25% annual return (or more). With idea being that once, if, it exceeds 25%... we should then risk the surplus a little more in hopes of getting even bigger return Or to leave this TE as is.. with current DD, but try to bring Return to 100% (annually)... Till then, unless I am of good certainty, won't be entering the trade... glad with 10%+ this month, so far so good...

So stay tuned.. And yes, direction still seems to be SOUTH

BTW opened one GOLD trade in this TE... Mobile (account switching) mistake The trade was not the mistake but the account in which I opened it was... I want to have this TE clean, dedicated... But will see if I should transfer to new one, for the reasons mentioned..

Yeah, sure was

Ok traded some WTI today... Not the OPTIMAL conditions but at least the main (quality parameter) is good... So I enter a little.. under-harvested somewhat.. but got this currently published TE to EVEN Return vs DD... Would still maybe restart TE.. since ideal would be to have like 25% return, 5%DD... But I also wonder if there would be much interest in this.. Maybe... I will either publish TE with the aim of 5%... and return 25%+... Or leave this one on... that currently has around 22% DD.. which might be good if Return would be 100% or at least 50%... Anyway, much depends on the market conditions... Currently they are not BAD but there are certain anomalies, stalls.. due to much upcoming news at the end of OCT... Starting to show... So atm not that certain, might re-enter WTI next week... not sure... But definitely done with WTI for the week... The latest snapshot of "controlling parameter" (right on the merlin's line! - same model used for WTI south prediction also)... Compare to the snapshots/links in this two posts: https://www.energyexch.com/showthrea...6#post12553776 and https://www.energyexch.com/showthrea...8#post12556128

I expect to post the projection (graphical) for WTI in maybe near future, in making... For now.. use the guidelines and the controlling parameter reference...

25% annual return right? Sounds good to me. Would you be shooting for a certain return quarterly or monthly or just comparing YTD to 25% run rate?

Posting the WTI parameter if possible would help a lot in following the system. You mentioned it is a downward line as well, is the slope similar?

Yes, 25% annual (once It get pass that, I expect (maybe) to risk those extra % (over the 25%) for potential even greater returns but not necessarily - do not plan to overtrade it, maybe just 25%+ and then BONUS, seen rather quickly...).. Market's are a little into overdrive atm.. as you can see as "controlling parameter"...
Yeah I know that would be best, but "the problem" atm is that I expect big things being set for the next 3-6months after that... So once the 31OCT19 is over, we shall see very quickly what the FED, ECB and BREXIT situation is... And also some US trade situations for a good measure.. It could then be projected/extrapolated from there... So I expect we can have the slope in November (mid to end of NOV)... Till then, at least for end of OCT, we might rely on the current parameter from other market and use the direction stated here... as a guideline, if parameter and all other conditions are favourable... Hope it was a little clearer..

Oh and about quarters.. No, I do not believe in them and not target them.. Should all goes well I plan to trade mainly if not only... till 15DECt this year, re-start 15JAN till 30APR.. and then closing in MAY (and go away) if all goes well... unless there are some special (breaking) opportunities, for "burners" etc... but would definitely not trade JUN, JUL, AUG... If all will go according to plan... Why? Because of many factors, google optimal trading times/months and also... my personal experience... So this will definitely not be LINEAR in a profit per day (quarter) sense... This is not a bank deposit or something... At least I do not trade like this and I think that anyone that is actually looking for that kind of consistency.. might be in the wrong racket... Annual target is all there is... The second is DD... All the rest I have already written... Not saying it is perfect but it is what it is, what appeared to be working, at least for me

BTW, I am thinking of setting 2 types of TEs... One for 25% annual, 5% DD and other for 100% aimed return (annual) and one for 100% annual and 20% DD...
So RoMaD 5 in both cases... I think we can cover both target people with this.. Because some people disregard anything bellow 100%.. because they have like 100USD deposit... but 100% is not bad.. I mean at 20%.. I believe majoirty of the people that could get 100USD deposit, could get 1000 USD (1k) so that would mean like 80USD per month "passive income" at 20% exposure to (debt)... I mean money is "cheap" atm... Specially if we are talking EUR.. Yeah, let's talk EUR instead, not much difference atm anyway... Current small loan for 12month is total about 3,5%... So basically free money I mean gold would be look...
at 100% annual return and 20% DD... That would mean... one could have 1k USD (to cover potential exposure, "worst case" in case (20%) DD is reached... And go to BANK, get a 5k (EUR) LOAN... that would cost (just checked at local bank, online) about 3%... 150EUR... You do understand what we are doing here? Using leverage, the normal way aka bank loan (some do not see that you can multiply leverage of trade.. much, by this, but also the risk)... So here we have 5k deposit (get 1k ready to cut the loses if needed)... and deposit to this supposedly 100%/20% (Return/DD)... And can get "passive income"... of 400USD... And that can be set in whatever way... Over company etc... In my country there is no TAX for SPOT currency trading for example... there is for other markets, so to each it's own... But you do the taxes yourself, I am just illustrating... Well would be ready to expose 5k (own money, just in case in goes south)... then we are talking x5 everything... meaning 2k passive income per month... So you can "pay out" exposure money+interests in the first 3months, the rest is pure "free" profit... The illustration is to show that 100% at 20% might be The ultimate juice here... And I do not plan to trade 1trade AFTER.. because I have seen that is the temptation for many traders that then meet the SWAN.. In martingale that this would be not, but you get the idea... So yeah, might set up 100% annual return goals at 20% DD and 25% annual at 5% DD... Which might be the same... Because... at 5%... and if we use the previous last/second example... so if you are risking 5k USD... at guaranteed 5% DD... You can then get the loan for 100k... for trading... So worst case DD is reached, you pay 5k of your own money and that is it.. But if it works.. you also get about 2k passive income per month... So you see... Not much difference between 25/5 and 100/20.. except it would be much greater to get the later loan You also see that THE JUICE is the RoMaD... The rest are pretty much standard financial tools and economics

So to sum up... PRIMARY TE (TradeExplorer) target would be: 25% annual return at 5% DD (DrawDown)... The second... 100% return at 20% DD... And also, the third (bonus)... the "burners"... that can give up to 100% per trade but are super-high risk... So I would not advise to "throw" more than 100 EUR or USD per trial/seed But quite few of those can be made, even in a row, if you check my TP20SL20 thread that I might do for WTI also, depending on the market...

About the current market... would not enter WTI now... since overdrive... I expect the FALL next week, but do not hold my tongue for it just now.. but will be checking how this week goes/closes... first...

Ok, I hope you all got the picture... It is important what will happen NEXT week and specially 1-2weeks after that.. so in the timeframe of the next 3weeks, starting from Monday Morning... it should be VERY clear where we are headed or not Or better start learn how to fry

Ok, I'll target November to experiment first hand with the system. Personally I think Brexit and US trade tensions will linger like a dark cloud but hopefully we do have some clarity soon.