A view on commodities

sangram1705

Well-Known Member
is there any major change in fundamentals of ng???

if ng is able to trade & close above 200 today then next resistance is at 227. is it trying to fill the gap between 211 to 219 or what??

in that case it will be in weekly support zone/demand zone.

all moves happened so fast that couldnot find a good entry. still waiting to find weakness!!!!!!!!!!!1
 

DSM

Well-Known Member
Hi Sangram, I too was wondering, for the surge in NG, which closed 11% higher. Technially, there was nothing to show. But there has been a forecast of an 'Artic Blast' overnight, which has led to the surge in prices. Will it sustain or be sold into? Will depend on how the weather turns out. Article copied below :

Natural Gas Extends Gain After Surge on Forecast for Arctic Cold - Naureen S. Malik

http://www.bloomberg.com/news/2015-...vance-as-lingering-u-s-cold-spurs-demand.html

Natural gas extended gains after the biggest surge in 11 months as a blast of Arctic weather predicted to swoop into the U.S. signaled increased demand after a mild December. Futures for February delivery rose as much as 8 cents, or 2.4 percent, to $3.312 per million British thermal units in electronic trading on the New York Mercantile Exchange and was at $3.294 at 11:29 a.m. Singapore time. It climbed 9.9 percent to $3.233 yesterday, the largest advance since Feb. 19. Total volume was about 16 percent below the 100-day average.

Gas is gaining for a third day as the government’s midday Global Forecast System showed temperatures will be well below normal from the Midwest to Northeast from Jan. 22 through Jan. 26, said Frontier Weather Inc. “The important thing is that it’s still cold, it didn’t warm up, and then the forecast changed to colder weather,” said Tom Saal, a senior vice president of energy trading at FCStone Latin America LLC in Miami. “These are the weeks in the middle of January and early February where we could see those larger withdrawals from storage.”

The low temperature in Chicago on Jan. 27 will drop to 6 degrees Fahrenheit (minus 14 Celsius), 12 below normal, AccuWeather Inc. said on its website. The Midwest and Northeast account for 63 percent of U.S. heating demand, according to the EIA, the Energy Department’s statistical arm.

The latest Global Forecast model shows temperatures declining to about 15 to 20 degrees below normal in the Midwest and Northeast late next week, said Jim Southard, a meteorologist with Frontier Weather in Tulsa, Oklahoma. The midday model showed milder weather at the end of the month, as above-average readings are predicted for central and eastern states, he said.

The overnight forecasts, which can carry more weight because they incorporate more computer models, indicated that there’s a potential for “another massive Arctic outbreak” later this month, Matt Rogers, president of Commodity Weather in Bethesda, Maryland, said in a report to clients.

Gas inventories probably fell by 229 billion cubic feet, according to the median estimate in the Bloomberg survey of 19 analysts. Projections ranged from declines of 182 billion to 255 billion. Stockpiles of the heating and power-plant fuel totaled 3.089 trillion cubic feet through Jan. 2.

“Fears of a March inventory glut have proved to be premature, and significant cold has the potential to create shortage issues, albeit not on the scale of last year,” Aaron Calder, a senior market analyst at Gelber & Associates in Houston, said in a report.

is there any major change in fundamentals of ng???

if ng is able to trade & close above 200 today then next resistance is at 227. is it trying to fill the gap between 211 to 219 or what??

in that case it will be in weekly support zone/demand zone.

all moves happened so fast that couldnot find a good entry. still waiting to find weakness!!!!!!!!!!!1
 

syam7

Active Member
Excerpt from an interview with Peter Brandt — a 30-year veteran trader with 41.6% annual compound returns.

http://www.mercenarytrader.com/2011/03/interview-with-a-trading-legend-part-i/

Part I - Mental milestone

Trading based on charts made sense to me, but just saying this does not start to explain the amount of work that was ahead of me. I just started systematically figuring out the charts – by this I do not mean the simple recognition of patterns, but rather the practical challenges of trading in real time. It’s fine to be a chartist, but what does it mean to be a chart trader. Analyzing charts and trading the charts are two entirely different challenges. Do I trade one-week patterns? Two-week patterns? Reversal patterns or continuation patterns? Where do I place protective stops? How do I enter a trade? Working through the process just took time. In fact, this process continues to this day.

You just keep working through the mechanics of how you conduct the process of trading. What’s your game plan? How do you get in, how do you get out? Then obviously you go through periods when the market spanks you and you’re wrong four or five times in a row. And you start questioning whether you need to change something.

So you go through that process enough that you begin to figure things out over time. Then, just about the time you think you have it figured out, your adopted approach gets challenged by the markets. But that challenging by the markets is good. Enough challenges force you to say “I don’t care, it’s just part of the process.” The continual challenges brought forth by trading also forces a trader to refine, refine and refine his or her approach.

***

For me, one of the biggest things was realizing I was not going to be right 80% of the time, or even 50% of the time. I would be right about 35% of the time – but that was over an extended period of time.

That figure of 35% was and still is true over an extended number of trades, where N as the number of trading events was a large figure. I began realizing that over 10 or 20 or even 30 trading events, the win/loss ratio deviated considerably from the norm – with a win/loss ratio that could go as low as 10 or 15%.

***

I went to the statistics department at Northwestern University, sat down with a professor and said: “Figure out for me what the odds could be of being wiped out betting different amounts of my capital on every trade. I knew the answer would resemble a bell curve, but I wanted to know what things looked like to the far right and left of the hump. And the professor created a model based on probablities involved in rolling a single dice. And he said, “A dice role of the numbers one or four are your winners, the other numbers are your losers. Now let’s just go through a very long series of dice rolls and see what happens.”

The professor ran a computer program and produced a distribution table and bell curves that gave me a considerable amount of insight into the random distribution of winners and losers given various win/loss ratios. I began to realize that risking 4 or 5 percent of capital in a program that was right on 35% over an extended number of trades, but with a high probability of being wrong 80% or 90% of the time over shorter numbers of trades, was a recipe for ruin.

And that’s how I came to the conclusion that I should generally not risk any more than 1 percent of capital because I realized, based on the mathematical probabilities, that it was inevitable if I risked even 3 percent of my capital per trade each time, I could seriously harm my capital base to the point I would then have to change the way I traded the markets. And that’s exactly what I didn’t want to happen.

That starting point on risk led me through the whole process of learning leverage, and how leverage is built. I think back on a lot of the stuff I had to learn and it’s often because I took a hit on a trade and realized “I hadn’t thought about that,” or “That was not a part of the equation I thought was right.” And so I was continually forced to go back and rethink an aspect of the trading process all over again.

Of the new people who start trading today – so many have no clue of the learning curve. I mean this is a steep mountain. And you’ve got to be willing to really, really go through a lot of learning – and you learn by mistakes. You learn by getting sliced up by the markets. You don’t come in, have a hot three months, and say, “Man, I’ve got it figured out.” You learn when when you realize, “Oh, I’ve been wrong 8 trades in a row, and now I’m getting another signal, or, I’ve just lost 20 or 30 cents in a 10 cent trading range,” and so on. And I just went through these situations again and again, and these were the challenges of the game for me.

***

I had a lot to learn. Any approach you take is complicated. So it was 1982, and there was the big move in the currencies that launched me – but then it was just a process of learning more about the markets, myself and my approach, making even more mistakes, feeling better about it, going through drawdowns. You go through a big drawdown, and your first temptation is “I’ve got to change something.” And actually I think the best response is not that something has to be changed, although that may also be the case, but something has to be learned.

***

Trading is an ongoing education. But like all other forms of education, a tuition has to be paid. When you make money, that’s great. When you start losing money, that’s the tuition you pay to learn. And the market gets to determine the tuition, you don’t get to determine it.

Let me add something very important about trading and drawdowns. There is very little material printed or online for the beginning trader on the subject of drawdowns. This is very unfortunate, because drawdowns are a harsh reality of trading. As a result, beginning traders have false expectations of the trading environment. Drawdowns are a fact of trading, and how a trader deals with drawdowns will determine the end game. It is like the word “drawdown” is a subject that is off limits and seldom discussed. Given that every trader deals with drawdowns and asset volatility, it is sad these subjects are not discussed with more transparency.


***

You find out after the fact that the biggest mistake you can make is changing your trading style based on your previous trade or series of trades. Attempting to optimize a trading approach based on a recent series of trades is just idiotic to do. You’ve got to think not in terms of results of a trade, but principles. Not just did I make a mistake but, for example, “Do I need to be more conscious of trend.” If so how do I determine and measure trend. Do I determine it with a moving average or with some other means? And in a drawdown you even start playing with that. I reduce my risk even further when I start to lose. If I get hit a few times, well, then it’s going to be three quarters of a percent, or half a percent, down to maybe a quarter of a percent on a trade. Then you start winning again and you build up the size of the bet.

***

My formula is really easy. I look at a chart – I’m a breakout trader, and I’ll tell you, over time I have had to learn over and over again to resist the temptation: “This thing is going to go up, I need to get in before it breaks out of this pattern.” I’ve lost so much money in trading ranges. So much money trying to jump ahead of a trend because I didn’t wait for the breakout. So that has been a hard lesson for me to learn. Intellectually I realize that the correct approach for me is to just stick an order in for a breakout and have a computer-based alert system so that I can know when I get filled instead of having to watch the prices all the time.

So I get in and I have a rule for where I set my stop. I want to set my stop based on the chart, not based on a dollar amount. I want the stop to make technical sense. So I know my entry, I know where my exit is if I am wrong, I can figure out the dollar risk per contract, so only then can I calculate out my leverage. So it may be that I’m risking 12 cents. Or maybe I can get away with risking 4 cents. I don’t want to force that number. I want the market to tell me, based on how it breaks out, where my stop is going to be.

***

I am amazed when I talk to novices who tell me they risk as much as 10% of their capital on a trade! Well I did that too. Back in the late seventies I did that, and I can tell you it doesn’t work! Risking 10% of capital on a trade is a well traveled road to ruin.

***
Experts say that fading breakout is a good strategy than getting in a break
outs as most of the breakouts and patterns fails.Then why should we go
against it?
 

Catch22

Well-Known Member
http://www.bloomberg.com/news/2015-01-26/stranded-on-wall-st-in-blizzard-how-type-a-does-plan-b.html
Financial markets prepared to remain open even as public transportation planned to shut down, with New Jersey Transit saying its trains would stop running for two days.
The last time the New York Stock Exchange cut trading hours for snow was on Jan. 8, 1996, when a blizzard dropped more than 20 inches on New York City. In 2012, Hurricane Sandy caused the longest weather-related shutdown for American equities since 1888 as exchanges closed for two days.

Affect Liquidity’
Exchanges stayed open during a severe snowstorm in 2010, and volume held up. Although nationwide trading slowed 19 percent from the five-day average, more than 8 billion shares changed hands on Feb. 10, 2010, according to data compiled by Bloomberg.

This storm’s wind-driven snow may fall as fast as four inches per hour and is poised to bring travel and commerce to a standstill from New York to Boston.

‘Same Predicament’
’Just like in today’s electronic markets, the blizzard means traders need to react quickly to take advantage of opportunities.”- Sosnick, equity risk manager at Timber Hill LLC,

Source- bloomberg.
 

DSM

Well-Known Member
Hi Syam,

With experience, we can have a deeper perspective. Fading the 1st breakout usually works, the 2nd one may be an even chance, the 3rd more likely to fail.... So we have to look at the larger picture, which will help us to make better judgements. In essence, besides just trying to fade the breakout, having additional context (be it fundamentals, political unrest for crude, weather patterns for NG, volume/inventory data, market cycles etc. etc). will surely help.

Experts say that fading breakout is a good strategy than getting in a break
outs as most of the breakouts and patterns fails.Then why should we go
against it?
 

DSM

Well-Known Member
Hi Catch....

NG has been very volatile, doing crazy moves on either side.... and taking a position is NG has been equivalent to betting on the weather rather than on NG which is totally irrational.... NY was expecting 3 ft. of snow, now downgraded to 18-24 inches..... How can one trade that? Mar. contracts is up 1.70% internationally, while trading -1.50% on MCX. Guess ideally, we should see a good move closer to the US opening....

http://www.bloomberg.com/news/2015-01-26/stranded-on-wall-st-in-blizzard-how-type-a-does-plan-b.html
Financial markets prepared to remain open even as public transportation planned to shut down, with New Jersey Transit saying its trains would stop running for two days.
The last time the New York Stock Exchange cut trading hours for snow was on Jan. 8, 1996, when a blizzard dropped more than 20 inches on New York City. In 2012, Hurricane Sandy caused the longest weather-related shutdown for American equities since 1888 as exchanges closed for two days.

Affect Liquidity’
Exchanges stayed open during a severe snowstorm in 2010, and volume held up. Although nationwide trading slowed 19 percent from the five-day average, more than 8 billion shares changed hands on Feb. 10, 2010, according to data compiled by Bloomberg.

This storm’s wind-driven snow may fall as fast as four inches per hour and is poised to bring travel and commerce to a standstill from New York to Boston.

‘Same Predicament’
’Just like in today’s electronic markets, the blizzard means traders need to react quickly to take advantage of opportunities.”- Sosnick, equity risk manager at Timber Hill LLC,

Source- bloomberg.
 

Catch22

Well-Known Member
(28Jan2015 21:00:48) : Crude inventory Update- U.S commercial Crude oil inventories increased by 8.90 million barrels from the previous week.(Forecast 4.20 M)(Previous 10.10 M)
 

Catch22

Well-Known Member
"(29Jan2015 19:01:30) : US News alert: Unemployment claims Actual 265 K from the previous week. (Forecast 301 K) (Previous 307K), Data positive for Dollar & Slight Negative for bullion."
 

Catch22

Well-Known Member
(29Jan2015 21:00:59) : Natural Gas Inventory Update - U.S commercial N.Gas inventories decreased by 94 BCF from the previous week. (Forecast -113 BCF ) (Previous -216 BCF) Data Slight negative for N.Ga
 

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