Written by: Anthony Crudele
Today we focused on trading Crude Oil because based on our strategy, CL had the cleanest look for trade opportunities. I’ve said many times before that we don’t live and die by our Beacon levels. We know that there is no holy grail and the key is to know what markets to trade on our Beacon strategy on any given day. This goes for any strategy that you’re using.
If you use Fibonacci levels, do you trade off of every level? Of course not. You pick and choose when you’ll trade a Fib and when you wont. Same goes for us. The key for us when trading Beacon is to see how the market has responded to our levels.
This morning we we’re watching Crude Oil (CL_F). I told our members and tweeted out about 48.18 as our pivot for direction. Keep this in mind: I use Beacon for my support and resistance lines, but I don’t live and die by them. I watch the reaction in the market along with divergence to confirm whether or not I should be trading Beacon levels.
As traders we cannot live and die by anything, we need a process and a strategy. I am a system trader that uses discretion. That means that I have a system that I use to determine trades (Beacon), but I don’t trade every single level, and that’s where the discretion comes in.
Trading the dogs days of summer…
This used to be a time in which I would most likely over-trade and lose money because I would be in a big hurry to trade and make money. After years of making the same mistakes when the volume and the volatility get really low, I finally figured out how I needed to trade on these days. Trade smaller and risk less. It was just that simple.
If you’re a trader who is new, or just a 1-3 lot trader, then this market is probably not for you. I always take the worse case scenario and go from there. There is nothing worse for a trader than a situation when you get stuck half or more of your normal risk per day on a day where you know it will dry up after the morning trade. Now you try to make a little back and most likely you lose a little more and with more fees now stacking up. At some point you may even lose way more than you would on a busy day just because you got frustrated.
This morning I posted on Twitter & talked to our traders in our member area about the Dollar being the key to watch for potential leadership in Gold, Euro, and Crude. The Dollar was hitting resistance at 97.50 at the same time we were testing support in Crude (43.44) and Gold (1314).
Both Crude and Gold had gotten just below our big picture support, but our short term levels were still in reasonable distance to our bigger picture levels. The fact that the Dollar was hitting resistance and we saw a reaction to the downside, that gave us an indication to look at long opportunities in both Crude and Gold.
In this mornings brief to our traders my focus was on potential trade scenarios in Crude Oil, Euro, and Yen. The Euro was the one that ended up giving us the strongest signal to trade off of.
As I have mentioned many times in the past, the markets that have the strongest confirmations are the ones that I focus my energy on. Confirmations for us come in forms of moving averages, MACD or Stochastic Divergence, and our number one confirmation is when our short term beacon strategy lines up with our 60 minute beacon levels.
In this mornings brief to our traders I talked about Crude Oil as a market of choice for trading today. The main reason was because of our latest Beacon strategy lines, but also because today was the EIA Data for Crude and that typically creates volatility.
The rest of the major markets were waiting for the Brexit or Remain vote, so this contributed to our focus on Crude Oil.
In our member area and on Twitter I posted the 48.35 area as key support for the bulls to hold. 48.35 is our 60 minute level that we do not trade directly off of. That level is our bias level. We then use our short term strategy to give us a trade setup.
Slow day today for us, and we started out with a couple of losing trades. Losing trades are part of the business. As a trader I expect to have losses, and by expecting to have losses I deal with them a lot easier now than I did when I first started. When I first started to trade I didn’t expect to lose, and the losses were much harder to heal from.
We kept our losses in check today because we believed it could be a slow day. Why did we believe it could have been a slow day? It all comes from my preparation. Today, the ES gave us a range bound look on our Beacon Indicators, and the rest of the markets we follow were not in key areas for day trades. No stories or themes from headlines in the overnight trade, as well as coming off a three day weekend.
Earlier today, I tweeted out “Knowing when to trade and when not trade has never been more important in the trading business. No more walking-in and clicking. #patience”
Today was a no trade for us in the ES, but CL provided a scalping opportunity. It generated a long with tight targets. Due to the slow conditions, I recommended to our traders that if they were to take the trade, just know that the markets are quiet and taking most or all of our profits at target 1 may be all she wrote.
This morning we were testing key resistance in Crude Oil (CL) at the same time as E-mini S&P (ES). If you are a close follower of the markets, these days CL and ES move together a lot of the time. When the CL’s short trade alert hit the board it was pretty much the same time we had an ES short trade alert.
The ES had 3 points of risk while the CL only had 9 ticks of risk with profit potential of 50 cents. Typically, we won’t put on the Texas hedge and get short both ES and CL at the same time, but with 50 cents of profit potential for only 9 ticks of risk it was far and away worth it. The ES trade gave us our first target, but failed to hit us on the second, ultimately giving our traders either a small profit or a scratch (depending how they executed it).