How to Start Intraday Crude Oil Trading.

Here, Crude oil, commonly known as petroleum, is a liquid. How to Start Intraday Crude Oil Trading.

And found within the Earth comprised of hydrocarbons, organic compounds and small amounts of metal.

And  While hydrocarbons are usually the primary component of crude oil, and their composition can vary from 50%-97% depending on the type of crude oil and how it is extracted.

Here, Organic compounds like nitrogen, oxygen, and sulfur typically make-up between 6%-10% of crude oil while metals such as copper, nickel, vanadium, and iron account for less than one percent of the total composition.

Intraday Approach to Trading Crude Oil Futures Contracts.

Here,  we will expand from an ‘approach’ into a fully automated trading strategy.

And that you can quickly, and easily implement.

Therefore, firstly we jump into the actual strategy.

Thus, it is important to note that many Trading Schools. How to Start Intraday Crude Oil Trading.

How to Start Intraday Crude Oil Trading

And Org readers might not be familiar with crude oil futures contracts. In a nutshell:

One contract of crude oil equals one thousand barrels of crude oil.

And the minimum price move is .01, or 1 penny. How to Start Intraday Crude Oil Trading.

Here, one penny in price movement equals $10. How to Start Intraday Crude Oil Trading.

And if you purchase a single contract of crude oil for $50.00. How to Start Intraday Crude Oil Trading.

Therefore, then quickly sell for $50.01, then your profit would be $10.

Here, Crude Oil futures contracts are highly liquid. and Typically, a million contracts will trade on any given day.

Here, The best time of day to trade crude oil futures contracts is during the ‘day session’.

And The day session would be defined as 9 AM (EST) – 11:30 AM (EST). How to Start Intraday Crude Oil Trading.

Here, If you trade within this time frame.  How to Start Intraday Crude Oil Trading.

And you will be participating with the majority of the daily trading volume. How to Start Intraday Crude Oil Trading.

Thus, the advantage of only trading within the day session is that the heavy volume keeps the Bid/Ask spread (usually) at 1 penny.

And it is also important to liquidate your crude oil futures contracts before the day session ends.

How to Start Intraday Crude Oil Trading

Here, If you do not, then you will be expected to have a maintenance margin of $2,500 – $3,000 per crude oil futures contract.

And For the purposes of this blog post, we are going to be only focusing on trading crude oil futures contracts Intraday.

And We do not want any overnight exposure or additional margin requirement.

Thus, We are looking to get the most trading bang for our trading buck. How to Start Intraday Crude Oil Trading.

Therefore, whenever you are in a trade. How to Start Intraday Crude Oil Trading.

And you should be asking yourself a simple question — do I currently have a statistical advantage?

And  If you do not, then you are the old lady playing the penny slot machine at the Indian casino.

Here: Or the sucker putting his casino chips on red or black. How to Start Intraday Crude Oil Trading.

Or the butt head wagering that Bruno ‘The Magnificent’ Beefcake will defeat Rocky via TKO in the 8th round.

Therefore, you are gambling. How to Start Intraday Crude Oil Trading.

Here, When you are gambling, you are making a wager where the house has a statistical advantage.

And Enough wagers and the house will grind you to nothing.

Here, You do not want to gamble.

And You want to own the slot machine, or the Roulette table, or the sports book.

How to Start Intraday Crude Oil Trading

Here,  But in order to achieve this, you need a statistical edge. How to Start Intraday Crude Oil Trading.

Thus,  Let others play against your edge, and watch them lose. How to Start Intraday Crude Oil Trading.

Here, in a prior blog post, we talked about a simple and robust trading strategy that we applied to the Emini SP500 futures contract.

And The concept is exceptionally simple. How to Start Intraday Crude Oil Trading.

Here, That we only want to be trading in the direction of the dominant trend of the day.

Therefore, we called this strategy, the Mid-Point trading strategy. How to Start Intraday Crude Oil Trading.

And You can read all about that trading strategy here. How to Start Intraday Crude Oil Trading.

Thus, in an additional blog post, we expanded the concept of the Mid-Point trading strategy with a VIX volatility filter.

Therefore, the end result was a fully functional trading strategy. How to Start Intraday Crude Oil Trading.

let’s take the Mid-Point trading strategy and apply the strategy to the crude oil futures contract.

Here, Exact Rules.

Using only the day session of the crude oil futures contract. How to Start Intraday Crude Oil Trading.

And we are going to be only focusing on the Buy side, or the Long side.

And entry rules as follows.

Thus, wait 2 hours after the market opens. How to Start Intraday Crude Oil Trading.

And Calculate the Mid-Point of the daily range. How to Start Intraday Crude Oil Trading.

Therefore, you can also read Crude Oil Free Tips. How to Start Intraday Crude Oil Trading.

How to Start Intraday Crude Oil Trading

And when the low of a 5-minute bar crosses the Mid-Point, then we want to buy Crude Oil at the market.

Thus, exit rules as follows.

Here, If the high of a 5-minute bar crosses below the Mid-Point, then exit the trade at the market.

Thus, exit the trade at the close of the day session. How to Start Intraday Crude Oil Trading.

What is the OVX? How to Start Intraday Crude Oil Trading.

Here, many readers are probably scratching their heads and wondering, “what in the hell is the OVX?”

Here, The OVX (Oil Vix) was introduced by the Chicago Board of Trade back in 2008.

And It is a measurement of the expected 30-day volatility of crude oil prices by applying the VIX calculation to the USO or the United States Oil Fund.

Thus, the calculation encompasses a broad spectrum of options prices. How to Start Intraday Crude Oil Trading.

How to Start Intraday Crude Oil Trading

Here, The calculation encompasses a broad spectrum of options prices. How to Start Intraday Crude Oil Trading.

And it sure sounds confusing. But do not let it! How to Start Intraday Crude Oil Trading.

Therefore, in a nutshell, when the OVX is down. then fear is leaving the oil market.

Thus, we can reasonably expect a rally in oil prices. How to Start Intraday Crude Oil Trading.

And When the OVX is up, then fear has entered the market, and we can reasonably expect oil prices to drop.

For example the VIX, the OVX is not a perfect predictor. How to Start Intraday Crude Oil Trading.

But in the land of the blind, the one-eyed man is king. How to Start Intraday Crude Oil Trading.

And Is there any scientific evidence that supports the theory that the OVX can predict crude oil prices? Yes.

And there have been several academic findings to support the theory. How to Start Intraday Crude Oil Trading.

Here, I do not expect the audience to quickly understand the calculations referenced in the article.

I simply peeled out the theory. How to Start Intraday Crude Oil Trading.

And then tested the theory on my own platform, using my own data. How to Start Intraday Crude Oil Trading.

Crude Oil Trading Strategy: Using the OVX as a filter. How to Start Intraday Crude Oil Trading.

Ok, so lets now take our original Mid-Point trading strategy and add the OVX as a filter.

Here, Exact rules as follows.

Thus, wait 2 hours after the market opens. How to Start Intraday Crude Oil Trading.

And if the OVX is down 2%.

Thus, calculate the Mid-Point of the daily range of crude oil.

How to Start Intraday Crude Oil Trading

And when the low of a 5-minute bar crosses the Mid-Point, then we want to buy Crude Oil at the market.

Here, Exit rules as follows. How to Start Intraday Crude Oil Trading.

And if the high of a 5-minute bar crosses below the Mid-Point, then exit the trade at the market.

Exit the trade at the close of the day session. How to Start Intraday Crude Oil Trading.

Here, Now let’s take a closer look at the individual trade performance.

And by introducing a volatility filter, our profit jumps higher. How to Start Intraday Crude Oil Trading.

Therefore, now we are looking at something nice. How to Start Intraday Crude Oil Trading.

And Our average trades size has jumped from $65 to $126 per trade. How to Start Intraday Crude Oil Trading.

Thus, we have reduced the sample size of trades to what I consider to be the “sweet spot” of 200 trades.

Most importantly, our drawdown has decreased from $10k to $2.7k. How to Start Intraday Crude Oil Trading.

Therefore a major improvement when to turn this strategy OFF. How to Start Intraday Crude Oil Trading.

How to Start Intraday Crude Oil Trading

And all strategies break.

Here, the markets are efficient; other participants will eventually find this edge and attempt to exploit it.

And once this happens, then the edge disappears. How to Start Intraday Crude Oil Trading.

Thus, you need to have a mechanism in place. How to Start Intraday Crude Oil Trading.

And that shuts the system off. How to Start Intraday Crude Oil Trading.

Here, If you notice on the above equity curve and there is a blue line. How to Start Intraday Crude Oil Trading.

And this line is a hundred-period moving average of the equity curve. How to Start Intraday Crude Oil Trading.

Here, Once the real-time performance pierces the equity curve–the gig is up.

And The edge is gone. How to Start Intraday Crude Oil Trading.

Thus, probably never to return.

Therefore,  it is important to have this already in place. How to Start Intraday Crude Oil Trading.

5 Steps to Making a Profit in Crude Oil Trading

Here, crude oil trading offers excellent opportunities to profit in nearly all market conditions.

And due to its unique standing within the world’s economic and political systems.

Also, energy sector volatility has risen sharply in recent years.

Thus, ensuring strong trends that can produce consistent returns for short-term swing trades and long-term timing strategies.

And Market participants often fail to take full advantage of crude oil fluctuations.

Because they have not learned the unique characteristics of these markets.

Therefore, because they are unaware of the hidden pitfalls that can eat into earnings.

In addition, not all energy-focused financial instruments are created equally.

And with a subset of these securities more likely to produce positive results.

How to Start Intraday Crude Oil Trading

Here are five steps needed to make a consistent profit in these turbulent markets.

Learn What Moves Crude Oil

Here, Crude oil moves through perceptions of supply and demand, affected by worldwide output.

And as well as global economic prosperity.

Thus, oversupply and shrinking demand encourage traders to sell crude oil markets to lower ground.

Therefore while rising demand and declining or flat production encourage traders to bid crude oil to higher ground.

And tight convergence between positive elements can produce powerful uptrend’s.

Here, like the surge of crude oil to $145.81 per barrel in April 2008.

Thus, while tight convergence between negative elements can create equally powerful downtrends.

And like the August 2015 collapse to $37.75 per barrel.

Here, Price action tends to build narrow trading ranges.

And when crude oil reacts to mixed conditions.

And with sideways action often persisting for years at a time.

Understand the Crowd

Here, Professional traders and hedgers dominate the energy futures markets.

And with industry players taking positions to offset physical exposure.

And while hedge funds speculate on long- and short-term direction.

How to Start Intraday Crude Oil Trading

Here,  Retail traders and investors exert less influence here than in more emotional markets.

Therefore, for example, precious metals or high beta growth stocks.

Here, Retail’s influence rises when crude oil trends sharply attracting capital from small players.

Thus, who are drawn into these markets by front-page headlines and table-pounding talking heads.

And the subsequent waves of greed and fear can intensify underlying trend momentum, contributing to historic climaxes.

And collapses that print exceptionally high volume.

Choose Between Brent and WTI Crude Oil

Here, Crude oil trades through two primary markets, Western Intermediate and Brent.

And WTI originates in the U.S. Permian Basin and other local sources.

Thus, Brent comes from more than a dozen fields in the North Atlantic.

And these varieties contain different sulfur content and API gravity.

And with lower WTI levels commonly called light sweet crude oil.

Here, Brent has become a better indicator of worldwide pricing in recent years.

Although WTI in 2017 was more heavily traded in the world futures markets.

And Pricing between these grades stayed within a narrow band for years.

How to Start Intraday Crude Oil Trading

But that came to an end in 2010 when the two markets diverged sharply due to a rapidly changing supply versus demand environment.

And The rise of U.S. oil production, driven by shale and fracking technology.

And increased WTI output at the same time Brent drilling underwent a rapid decrease.

U.S. law dating back to the Arab oil embargo in the 1970s has aggravated this division.

Here, prohibiting local oil companies from selling their inventory in overseas markets.

And those laws are likely to change in the coming years.

And perhaps narrowing the spread between WTI and Brent, but other supply factors could intervene and keep the divergence in place.

Many of CME Group’s New York Mercantile Exchange (NYMEX) futures contracts track the WTI benchmark, with the “CL” ticker attracting significant daily volume.

Here, the majority of futures traders can focus exclusively on this contract and its many derivatives.

Thus, Exchange-traded funds (ETFs) and exchange-traded notes (ETN) offer equity access to crude oil.

And their mathematical construction generates significant limitations due to contango and backwardation.

How to Start Intraday Crude Oil Trading

Read the Long-Term Chart.

Here, WTI crude oil rose after World War II, peaking in the upper $20s and entering a narrow band until the embargo in the 1970s triggered a parabolic rally to $120.

Therefore, it peaked late in the decade and began a tortuous decline, dropping into the teens ahead of the new millennium.

Thus, Crude oil entered a new and powerful uptrend in 1999, rising to an all-time high at $157.73 in June 2008.

And it then dropped into a massive trading range between that level and the upper $20s, settling around $55 at the end of 2017.

Pick Your Venue

Here, The NYMEX WTI Light Sweet Crude Oil futures contract (CL) trades in excess of 10 million contracts per month, offering superb liquidity.

And it has a relatively high risk due to the 1,000 barrel contract unit and .01 per barrel minimum price fluctuation.

And there are dozens of other energy-based products offered through NYMEX.

Thus, with the vast majority attracting professional speculators.

How to Start Intraday Crude Oil Trading

But few private traders or investors.

The U.S. Oil Fund offers the most popular way to play crude oil through equities, posting average daily volume in excess of 20-million shares.

Thus, this security tracks I futures but is vulnerable to contango.

And due to discrepancies between the front month and longer-dated contracts that reduce the size of price extensions.

Thus, The iPath S&P Goldman Sachs Crude Oil Trust ETN presents an alternative.

Thus, with an average daily volume greater than three million shares.

But is also vulnerable to similar profit-dampening effects.

Here, Oil companies and sector funds offer diverse industry exposure, with production, exploration.

And oil services operations presenting different trends and opportunities.

And while the majority of companies track general crude oil trends.

Here, they can diverge sharply for long periods.

And these counter-swings often occur when equity markets are trending sharply, with rallies or selloffs triggering cross-market correlation that promotes lockstep behavior between diverse sectors.

Therefore, the five largest U.S. oil company funds and average daily volume are:

SPDR Energy Select Sector ETF: 18,401,461.

SPDR S&P Oil and Gas Exploration and Production ETF: 11,735,669.

How to Start Intraday Crude Oil Trading

Market Vectors Oil Services ETF: 7,641,589. How to Start Intraday Crude Oil Trading.

iShares U.S. Energy ETF: 1,169,697. How to Start Intraday Crude Oil Trading.

Vanguard Energy ETF: 647,095.  How to Start Intraday Crude Oil Trading.

Here, Reserve currencies offer an excellent way to take long-term crude oil exposure.

And with the economies of many nations leveraged closely to their energy resources.

Here, U.S. dollar crosses with Columbian and Mexican pesos, under tickers USD/COP and USD/MXN, have been tracking crude oil for years.

Thus, offering speculators highly liquid and easily scaled access to uptrends and downtrends.

Thus, Bearish crude oil positions require buying these crosses. How to Start Intraday Crude Oil Trading.

And while bullish positions require selling them short. How to Start Intraday Crude Oil Trading.

The Bottom Line

Here, Trading in crude oil and energy markets requires exceptional skill sets to build consistent profits.

And Market players looking to trade crude oil futures.

Therefore, its numerous derivatives need to learn what moves the commodity.

Here, the nature of the prevailing crowd, the long-term price history and physical variations between different grades.

How to Start Intraday Crude Oil Trading

How to Trade Like a Professional Oil Trader – Crude Oil Trading Tips.

Here, today you are going to learn how to trade like a professional Oil trader by using our Crude Oil trading tips.

And The Crude Oil market is not just a high liquidity market. How to Start Intraday Crude Oil Trading.

But it is also one of the most favored markets by professional traders who like to find opportunities to profit.

Here, it is no secret that the Crude Oil market is dominated by the commercial players and the big hedge funds.

And that is why we designed this strategy to help you swim with the big sharks.

Here, Commercial players, such as big Oil producers.

Therefore, use the Crude Oil futures market to hedge physical exposure from possible big market swings.

Thus, on the other hand, the big hedge funds speculate on the short-term Oil price direction.

And when you try to trade such an overcrowded market. How to Start Intraday Crude Oil Trading.

Here, you also need a Crude Oil strategy.

Therefore, if you want to perform at a high level and survive trading Oil.

And Smart money uses computers and high-frequency trading that executes multiple trades per second.

Moving forward, we will go through some significant aspects that a good Crude Oil strategy needs to incorporate.

And we will also share some Crude Oil trading tips. How to Start Intraday Crude Oil Trading.

How to Start Intraday Crude Oil Trading

And read trading discipline, to learn the most important skill for successful trading.

Crude Oil Trading Tips.

Unlike many other markets, if you want to have a better reading of the Oil price action.

And you also need to be interested in the fundamental side. How to Start Intraday Crude Oil Trading.

Thus, the Oil supply and demand balances are a critical factor that can alter and change the Oil trend.

In this regard, keeping an eye on the Oil output forecast and consumption outlook can give you an extra edge.

And The Oil market is also very sensitive to the geopolitical risks. How to Start Intraday Crude Oil Trading.

Thus, everything that happens in Iran.

And anything that happens in terms of weather in the Gulf of Mexico.

Thus, Will adversely affect the Oil supply output. How to Start Intraday Crude Oil Trading.

And Another trading tip is that Oil prices are sensitive to the seasonal pattern.

Here, If you get into the seasonal flow of trading Oil.

And can be quite rewarding.

Here, The Crude Oil price has the tendency to rise in August, due to the summer driving season.

How to Start Intraday Crude Oil Trading

Thus, it tends to fall towards mid-September and October. How to Start Intraday Crude Oil Trading.

Here, In the category of another crude oil trading tip. How to Start Intraday Crude Oil Trading.

And we mention that the US dollar will also affect crude oil prices. How to Start Intraday Crude Oil Trading.

Thus, the strength of the dollar is a quick way to gauge the strength of Crude Oil prices.

And as a general rule, crude oil prices tend to drop when the US dollar appreciates.

And when the dollar is weaker, crude oil prices tend to strengthen. How to Start Intraday Crude Oil Trading.

Here, If history can be used as a barometer to forecast Crude Oil prices. How to Start Intraday Crude Oil Trading.

And we can say the US dollar and Oil had an interesting and perhaps surprising relationship as they tend to move in opposed directions.

Crude Oil Trading Strategy 

Let’s now look into what it takes to develop a consistently reliable Crude Oil strategy.

Thus, we have decided to share some crude oil trading tips that have stood the test of time.

And that can help you trade like a professional oil trader. How to Start Intraday Crude Oil Trading.

How to Start Intraday Crude Oil Trading

Here, before we go any further, we always recommend taking a piece of paper and a pen and note down the rules of this entry method.

Here, for this article, we’re going to look at the buy side. How to Start Intraday Crude Oil Trading.

Now, we are going to share our personal step-by-step guide. How to Start Intraday Crude Oil Trading.

There are many technical indicators. How to Start Intraday Crude Oil Trading.

And you can choose from, and picking the right one is important. How to Start Intraday Crude Oil Trading.

Thus, if you want to make good trades. How to Start Intraday Crude Oil Trading.

And the best crude oil day trading indicator is the Stochastic RSI indicator.

Therefore, at least that is what we found out after trading for many years the Oil market.

Here, The second technical indicator we are going to use to spot cycles in the commodity market is the CCI indicator.

And The CCI indicator was really designed to find cyclical trends in the Oil market.

And to be used as a bearish or bullish filter.

Here, the preferred CCI settings are 200-periods.

Technically, the way to interpret the Commodity.

Thus, channel indicator is that a positive reading above the O line is a bullish signal and a start of an uptrend.

You Can Also Read:

Best Crude Oil Tips Expert

Best Intraday Stocks Today

How to Start Intraday Crude Oil Trading

And while a negative reading below the line is a bearish signal.g.

Wait until the Stochastic RSI indicator shows an overbought reading for a prolonged period of time.

Here, A good crude oil strategy only looks to buy in strong up days. How to Start Intraday Crude Oil Trading.

Thus, contrary to the popular belief.

Here, when a market shows an overbought reading for a prolonged period of time that is a strong bullish signal.

As the saying goes, a market can stay in overbought and oversold territory longer than you can remain solvent.

Here, Oil prices are very dynamic and that’s the reason.

And why we do not want to constrain how much time it needs to stay in overbought territory for a valid trading signal.

Thus, as a general rule, the Stochastic RSI indicator needs to not drop below the 50 lines during this time.

Here,  Preferably, we want to see strong readings in the region of the 80 levels.

Therefore, we are still not ready to pull the trigger as there are still two more trading conditions that need to be satisfied.

How to Start Intraday Crude Oil Trading

Stochastic RSI indicator needs to drop in oversold territory, and the CCI indicator needs to show a reading above the 0 lines (preferably above the +100 line).

Here, Now that we know that a prolonged overbought reading means smart money buying power.

Thus, we can assume that once the Oil market reaches oversold reading the smart money will show up again to keep Oil prices up.

And To guard ourselves against the possibility of a false signal we added the CCI indicator to confirm Crude Oil cycle.

Thus, during the time the Stochastic RSI resets, we need to see the CCI holding above the 0 lines; preferably we want the CCI indicator to hold above the +100 line.

And  A CCI reading above the +100 level will ensure a higher probability of the trade to succeed.

Therefore, now that Crude Oil price is satisfying these new technical requirements, we can lay down a simple entry strategy to buy Crude Oil.

Buy at the market once the Fast Moving Average (Stochastic RSI) crosses below the 20 levels.

How to Start Intraday Crude Oil Trading

Here, This Crude Oil entry strategy is easy to implement.   

And We only need the fast moving average of the Stochastic RSI indicator to cross below the twenty levels.

Usually, the blue line is the fast moving average.

Here, You can easily identify the fast moving average.

Thus, it is the one moving average that it is in front.

Here, this is a quick trade that enables all traders that took that trade to walk away from the trading screens for the rest of the day.

How to Start Intraday Crude Oil Trading

Hide your protective Stop Loss below the swing low that corresponds with the previous time the Stochastic RSI indicator was in oversold territory.

Here, simply identify when was the last time the Stochastic RSI indicator was in oversold territory.

And then locate the corresponding swing low on the price chart.

Thus, once you’ve identified that point on the Crude Oil chart, use it to place your protective stop loss.

And last but not least, we also need to define where we take profits when trading Oil.

Take profit at the end of the day or if the CCI drops below the Zero line.

Here, Crude Oil has high volatility and great potential to profit from the intraday trends. 

And Our favorite crude oil exit strategy is to let the trade run until the end of the day.

Thus, when the CCI indicator drops below the zero lines, whichever comes first.

Therefore, we are going to incorporate this valuable resource into our exit strategy which is the Commodity Channel Index. Therefore.

And The CCI indicator can spot in advance.

Thus, when an Oil cycle has ended or when a new one has started.

Conclusion – Crude Oil Strategy. 

Here, The big trading volume that pours into the Oil market can generate some freakish trading opportunities for the prepared trader.

Therefore, it is important to have a commodity trading strategy.

Therefore, no crude oil trading tips can substitute the necessary trading skills.

Thus, you need to survive in the commodity market.

And The bottom line is that traders can benefit from volatile WTI Crude Oil prices by using our trading tips.

However, you also need to exercise a great amount of discipline.

Thus, the Oil market is infested with the big sharks that want your money.