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Category: Futures Trading

Futures trading is done by two main parties, one of which is the hedger and the other one is the speculator. Where a speculator is there to trade for either their own accounts or that of their clients, a hedger always uses futures as a possible protection from losses. Hedgers can also be described as individuals or business owners who are more risk averse. Speculators and hedgers are likely to benefit from futures trading if the trader has a strong ability to analyze the markets and understands that future behavior. Though futures can behigh risk, they offer an equally high return and are thus very tempting.

In case you are new to futures trading you need to understand how things work. We at Cannon Trading are there to help with your understanding of all the elements of futures trading and also counsel and advise you with the same. Our knowledge base featured on our website, is a store house of information. In order to know every aspect of futures trading, you must read through these articles that have been listed in this category archive. Go through it and get better informed!

Crude Oil Futures Trading Updates for February 2019

Posted on by Ilan

Crude Oil Futures Trading Updates for February 2019

Crude oil futures experienced one of the strongest sell offs to finish 2018. The market sold from the mid 70’s into the mid 40’s in a matter of 7 weeks.

See daily chart below:

CrudeOilChart21319

 

There were many reasons for the sell off. US China trade talks or lack off, OPEC production, US $ strength and much more but all this is old news at this point and the main focus of futures traders going forward is ”what next?” Before I try to answer that, lets take a look at some key factors that are general in nature to futures trading and crude oil futures trading:

Crude Oil is part of the energy sector along with “it’s” brothers “RBOB – Unleaded gas” and heating oil and cousin, natural gas. All traded on the NYMEX/GLOBEX exchange.

Crude Oil Futures Specs
Hours: 5:00 PM to 4:00 PM next day PM Central Time
Margins: $3410 initial, $3100 Maint. ( as of the date of this newsletter)
Point Value: full point = $1000 ( Example: 71.80 to 72.80 ). Min fluctuation is 0.1 = $10 ( Example: 71.80 to 71.81)
Settlement: Physical, deliverable commodity

Months: Monthly cycle, All Months

Weekly Options: YES
Crude Oil is one of my favorite markets for Day Trading because of the intraday volatility and movements. Be careful, these factors can work against you or in your favor.

Some of the basic fundamentals to keep in mind when you are considering a trade in the crude oil as well as other energies

  1. Longer term view of current market prices
  2.  Dates and times of important reports. Namely, Tuesday afternoon report (API) and the DOE report on Wednesday mornings at 10:30 Am EST
  3. Weather and Seasonality
  4. Correlation to US Dollar prices
  5. Inflationary prospects
  6. Geopolitical Stability
  7. U.S. Fiscal and Monetary Stability

Keep in mind that the GLOBEX/NYMEX also offers the mini Crude oil contract which is half the size and may be a good alternative for smaller/ begginer traders.

MINI Crude Oil Futures Specs
Hours: 5:00 PM to 4:00 PM next day PM Central Time
Margins: $1705 initial, $1550 Maint. ( as of the date of this newsletter)
Point Value: full point = $500 ( Example: 62.80 to 63.80 ). Min fluctuation is 0.25 = $12.5 ( Example: 61.80 to 61.825)
Settlement: Cash Settled commodity one day prior to the Big Contract

Months: Monthly cycle, All Months

So just like when you are trading any commodity or futures contract, one has to ask themselves the following questions in my opinion:

  • What time frame are you trading / looking at? Seconds and minutes? Hours and days or maybe even weeks and months? The answer can definitely impact the type of strategy you will use
  • Do you have a view of the market? Is it going higher? Going lower? Range bound? Is there a trend?
  • What is your personal preference? Risk capital? How much time do you have for following the markets?
  • Are you experienced enough to take a go at it on your own or would you like to chat/ discuss, dissect the markets with a commodity broker, a series 3 licensed futures broker?

If your goal is to scalp and day trade crude oil futures, then take a look at what I consider a timeless piece I wrote a few years back on how to utilize fear and greed to day-trade crude oil futures.

This article has some chart examples and specific trading set ups using crude oil futures trading: Crude Oil Day Trading

Now back to the “million dollar question” – What is next for Crude Oil Futures in the next few weeks?

In order to answer that I will look at the daily chart above and then take a look at the weekly chart below:

CrudeOilChart21319weekly

Based on the fact that we had a major sell off that stopped on support levels, the fact that we are bouncing since then and the opinion I hold that crude oil longer term pressure is still down, my current view for this market is that we will see expanded range bound trading. I am looking for the market to trade between $48 and $59 ( hence the word expanded) over the next few weeks and perhaps more BEFORE it may attempt to take another stab at the down side.

“Well, what good is that you may say to yourself…..” If I am right and you are willing to speculate with risk capital, then this information can be valuable.

My preferred method would be to try and sell call options spread ( vertical call spreads) when the market rallies and sell vertical put spreads when the market sells off. Selling options is a risky strategy!! It is not for new commers and you can learn much more here.

The main theory behind selling the calls and the puts is to take advantage of the time decay of options.

As many of us know, geo political events affect the markets in general and crude oil futures in specific. No one can tell what news, wars, events will take place and that is obviously the unknown factor.

I tell my clients many times on different occasions that entering a trade is only the first part of the equation, the main and even more important part is: how to manage the trade? Where do I exit if I am correct? Where should I exit if I am wrong? Should I use multiple contracts? How much am I willing to risk on the trade?

Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains – this one is not different. If you need help creating a trading plan, visit our broker assist services.

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Getting Started in Commodity Futures Trading

Posted on by Ilan

Getting Started in Commodity Futures Trading

 

Since 1851, futures trading has been a cornerstone of the U.S. financial markets. However, despite its long history, trading in the futures commodities market has remained elusive to most investors. But it doesn’t have to be, trading in futures poses large risks but also substantial rewards to the level headed and well-studied trader.

The futures market deals in commodities. Originally, these commodities were agricultural, but in today’s market they have expanded to include the basic materials that make up most consumer products. Examples of commodities traded on the futures market are: gas, aluminum, currencies, cotton, gold, wheat, bonds, and oil. A futures contract is essentially a contract between a buyer and seller of one of these commodities, to buy or sell at a specified date and price.
In order to take advantage of the opportunities offered on the futures market, a trader must educate himself in supply and demand analysis. It is crucial to research the market trends of the commodities one wishes to trade in as well as seasonal cycles. Only with thorough research and preparation will a trader be fully positioned to capitalize on the trends of their chosen market.

Helpfully, the advent of electronic trading has leveled the playing field and given traders at home essentially equal access to those on the market floor. Electronic trading platforms allow all investors to guide their own portfolios, while maintaining access to licensed brokers who can assist them.

When beginning in the futures market, it is important to use a demo electronic trading platform before going live into the market. Demos allow traders to fully familiarize themselves with the pace of the market, experiencing the fast rise and fall of daily trends without the risk of actual investment. It is advisable to begin one’s futures portfolio with only 2 or 3 commodities, and demo for at least four weeks before going live. This period of time allows a trader to develop important strategies that will carry him through the market’s storms.

After four weeks of demo trading, a trader should feel confident entering the live market. It is a pitfall to get stuck in demo trading and never jump into a live account, so it’s important to remember that as long as a trader has done his research and closely monitored his demo trades, he should feel more confident in using his live account.

Once live, the most important two things for investors to remember are to trust their research over their emotions, and to avoid overtrading. Futures trading can be extremely volatile, a cool head and moderate hand will get a trader out of trouble.

Futures trading is definitely advanced work, but with the right research, a good strategy, and an ability to stay focused and level headed, a trader can conquer their fears of the market. To get started with futures trading, contact the experts at Cannon Trading!

 

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

How Discount Futures Brokers Saves Your Time and Money

Posted on by Ilan

You’ve just decided that it’s time to open a trading account. Maybe you’ve already spent time studying the markets and mapping out your trade strategy – or you’ve put it on your to-do list.

However much time you plan on devoting to this task, or how intently you plan on concentrating on it, you’ll also have another important thing to consider – seriously: who to use as your futures broker. At the most basic level, trading is putting your money at risk – in the hands of a brokerage house responsible for handling your funds and executing/clearing your trades. Those trades will incur commissions and require margin to hold in your account – and all these components call for their own analysis.

If you’ve decided to open an account with a discount broker, it’s presumed you’ll be selecting a trading platform with which you’ll place your own trades, unassisted. As the name implies, commissions for trades placed through a discount broker are less – often meaningfully – than full-service brokers. Commissions are that main fixed cost of trading, so the more trades you make, the higher your fixed costs, the greater the impact on your account’s bottom line. So, certainly you want to be mindful of this aspect of your trading. And to that end, make sure you understand how commissions are quoted, the several elements of a commission and how they’re presented to you overall.

Futures commissions are almost always charged on a per-trade basis and are quoted as “per side.” Two sides – a buy and a sell (in either order) constitute a “round turn. ”The elements of a commission include the exchange fee, the National Futures Association (NFA) fee, the brokerage fee and possibly other fees (routing fees, platform fees, etc.) The bottom line when you’re doing your shopping: understand the total per side / per round turn commission – not leaving out any of its elements – so that you have an accurate assessment of this cost to your trading, so you can compare among those firms with which you’re considering opening your account.

To quote Warren Buffet, “Price is what you pay; value is what you get.” When opening a futures trading account, this translates to: know what you want/need to be the trader you want to be: the features of your trading platform, the availability of your broker, the support the clearing firm provides, the clearing firm’s day-trading margins, whether the clearing firm is staffed with an overnight desk, etc. Find what you want, become comfortable with its costs, open your account, plan your trade and trade your plan.

One last word regarding trading platforms: there’s no argument that placing trades via an online trading platform with instantaneous access to the futures markets is by far the most efficient means of trade execution – compared to dialing up a futures broker, providing verbal trade instructions that the broker needs to listen to, repeat back to you to make sure the order is understood and then place the trade on your behalf. So, look for a trading platform you’re comfortable using. There is a fairly wide range of choices available for you to single out for yourself. Almost all FCM’s offer their own proprietary platforms and they support the many third-party ones available as well.


Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Trading Crude Oil Futures

Posted on by Ilan

Tips for day trading NYMEX crude oil futures

By Ilan Levy-Mayer, VP Cannon Trading Co, Inc.

When it comes to day trading futures contracts, crude oil futures are assumed one of the leading positions as far as trading volume.

 

During the month of May 2018,  crude oil futures averaged around 1 Million contracts traded per day! That actually surpasses contracts like the ten-year notes, mini SP, mini Nasdaq and others who have traditionally been leaders’ in terms of volume.

 

Part of the growth in crude oil futures is attributed to day trader participation. Day traders, by definition, will enter and exit their positions during the same trading day. This adds volume to the market traded.

 

Some of the tips I am sharing below can be applied to most futures contracts as well as other financial products that are traded like stocks, forex, bonds and others. Some of the advice I am sharing is very specific to the crude oil futures trading field.

 

  1. Know the product you are trading:

 

  1. Just like a trader who trades a stock like Facebook knows what Facebook does, when its earning reports are due and other factors, so does a crude oil futures day trader needs to know a few facts about crude oil:

 

  • Contract Size: Crude Oil Futures consist of 1,000 barrels. For the trader this means that each full $1 move in crude futures = $1,000 against you or in your favor.

 

For example:  A move from 72.10 to 73.10 = $1,000 and a move from 72.10 to 72.11 = $10 (the minimum fluctuation size or the tick size). Be aware that the CME also offers the mini crude contract,  which is half the size.

 

  • Trading Hours: Crude oil futures trade on the Globex terminal between the hours of 5:00 PM CST the DAY BEFORE to 4:00 PM CST the following day. Which means 23 hours of straight trading. It is important to know that most of the volume will trade between the hours of 8:00 AM CST and 1:30 PM CST, as these hours correspond to the “pit session” of the old trading floor.

 

Another key aspect to remember is that crude oil is a deliverable commodity and the “front month” will change every 30 days or so. For example: since May 22nd 2018 we have been trading July crude oil.

 

  • Reports: There are more than a few reports that will affect crude oil future prices indirectly. These include monthly unemployment, the FOMC rate decision, and a few others.

 

However, there are two major reports that move crude oil futures and its by-products (unleaded gasoline and heating oil) sharply: The API report, which comes out at 3:30 PM CST every Tuesday, and the DOE (Dept. of Energy) inventory numbers, which come out almost every Wednesday at 9:30AM CST.

 

Take a look at this one-minute chart from Wednesday, May 16th right around the report time below to understand the volatility involved.

chart1

As you can see above, the market made a move of $700 per ONE contract in a matter of minutes, perhaps even seconds! That type of risk and opportunity is one of the factors attracting day-traders into the crude oil market.

 

  • Geo Political Events: Middle East tensions, the Iran nuclear deal, tensions between Iraq and its neighbors…these are all examples of events that affect crude oil prices. Not to mention OPEC meetings!

 

 

  1. Trading Personality:

 

In my opinion crude oil (like many other markets) will have one of the following 3 modes: trending, two-sided volatility, or Choppy/quiet/range bound trading.

 

My experience is that crude will more often fall into the first 2 categories:  strong trend or two-sided volatility.  This leads me to my next point below, different trading set-ups.

 

  1. Trading Set-Ups:

 

My preferred methods for trading crude are either breakout concept in an attempt to catch a strong move up or down once the market broke some key support or resistance levels, AND/OR counter trend methods to take advantage of when the market is oversold or overbought. Crude does seem to bring more fear and greed out of traders. So looking at RSI levels, for example, and using moving averages ON the RSI to try and get a feel for market reversals are methods worth exploring.

 

  1. Keep a journal:

 

Like with any other trading, keep a journal. Take notes on how the market reacted to certain reports, how the markets traded during certain times of the day, and action you took and emotions you had that either helped or hurt you while trading. These notes will help you going forward.

 

In summary, crude oil futures volume has increased significantly these past few years. The crude oil futures offer traders certain dynamics that other markets may not at certain times. Volatility, fear and greed are key traits for this market. Remember that trading crude oil futures specifically and futures and options in general carries a large degree of risk and is not suitable for all investors. Make sure you consult with a series 3 broker if you never traded this market before. As always, I wish you Good Trading!

 

Important: Trading commodity futures and options involves a substantial risk of loss.

The recommendations contained in this letter are of opinion only and do not guarantee any profits.

There is not an actual account trading these recommendations.

Past performances are not necessarily indicative of future results.

Trade Systems Results 5.09.2018

Posted on by Ilan

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Voted #1 Blog and #1 Brokerage Services on  TraderPlanet   for 2016!!

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Dear Traders,
The Iran nuclear agreement “event” caused quite a bit of intraday volatility in the markets, mostly in crude oil and related energies but also in equities and gold.
As a trader, you must know which reports, events are scheduled and the possible effects they may have on the markets you trade.
keeping a trade journal WILL help.
On a different note:
Browse and view ACTUAL trading results from different trading systems offered at Cannon Trading Co, Inc.
If you like to set up a time and chat/ evaluate any system with a licensed series 3 broker, please contact us.

Continue reading “Trade Systems Results 5.09.2018”

List of First Notice and Last Trading Days for May 5.08.2018

Posted on by Ilan

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Voted #1 Blog and #1 Brokerage Services on  TraderPlanet   for 2016!!

____________________________________________________________________

Dear Traders,
Heads up with upcoming first notice and last trading days for various commodities below. Please contact us with any questions:
 
First Notice Day
Contract Month
Contract
1-May
May
ICE Sugar
1-May
May
Orange Juice
1-May
May
London Coffee
30-May
June
Long Gilt (Liffe)
31-May
June
2-Yr. & 5-Yr. Notes
31-May
June
10-Yr. Notes & 30-Yr. Bonds
31-May
June
COMEX & ICE Metals
Last Trading Day
Contract Month
Contract
1-May-18
April
Milk III & Butter
8-May-18
May
Cotton
10-May-18
May
Orange Juice
14-May-18
May
CME Eurodollar
14-May-18
May
Wheat (CBOT, KC, MN)
14-May-18
May
CBOT Corn & Oats
14-May-18
May
Lean Hogs
14-May-18
May
CBOT Soybeans
14-May-18
May
CBOT Soybean Meal & Oil
14-May-18
May
CBOT Rice
14-May-18
May
Canola
15-May-18
May
ICE Cocoa
15-May-18
May
Lumber
15-May-18
May
London Cocoa
18-May-18
May
ICE Coffee
22-May-18
June
NYMEX Crude Oil
24-May-18
May
Feeder Cattle
29-May-18
May
COMEX & ICE Metals
29-May-18
June
NYMEX Natural Gas
29-May-18
June
Live Cattle
30-May-18
May
Milk III & Butter
31-May-18
May
30-Day Fed Funds
31-May-18
June
NYMEX RBOB & Heating Oil
31-May-18
July
ICE Brent Crude Oil
31-May-18
May
London Coffee

Continue reading “List of First Notice and Last Trading Days for May 5.08.2018”

Trading Levels for May 1st, 2018

Posted on by Ilan

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Voted #1 Blog and #1 Brokerage Services on  TraderPlanet   for 2016!!

____________________________________________________________________

Dear Traders,

There will be no trading commentary today.

Continue reading “Trading Levels for May 1st, 2018”

Support & Resistance Levels 4.30.2018.. #ZW_F #ES_F #NQ_F #RTY_F #SI_F #GC_F #CL_F

Posted on by Ilan

____________________________________________________________________

Voted #1 Blog and #1 Brokerage Services on  TraderPlanet   for 2016!!

____________________________________________________________________

Dear Traders,

There will be no trading commentary today.

Continue reading “Support & Resistance Levels 4.30.2018.. #ZW_F #ES_F #NQ_F #RTY_F #SI_F #GC_F #CL_F”

Trading levels for April 27th, 2018

Posted on by Ilan

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Voted #1 Blog and #1 Brokerage Services on  TraderPlanet   for 2016!!

____________________________________________________________________

Dear Traders,

There will be no trading commentary today.

Continue reading “Trading levels for April 27th, 2018”

7 things to know before trading Wheat Futures 4.19.2018

Posted on by Ilan

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Voted #1 Blog and #1 Brokerage Services on  TraderPlanet   for 2016!!

____________________________________________________________________

Author: Joseph Easton, Senior Broker at Cannon Trading

Dear Traders,

  1. The Basics:

There are two types of Wheat most commonly traded…

“Chicago Soft Red Winter (SRW) and KC Hard Red Winter (HRW) are the global industry standards for wheat. Chicago SRW Wheat is the most liquid Wheat futures contract in the world, trading the equivalent of more than 15 million tons each day in 2013-9 ½ times more than the largest European contract. Producers, processors, millers and exporters continue to look to Chicago SRW and KC HRW Wheat for the liquidity that is critical for any risk management solution.

Liquidity means that you can execute positions quickly, effectively and efficiently. Liquidity offers more flexibility in structuring hedging strategies to meet your timing and market needs. And when the world is facing new challenges in Wheat risk management, liquidity provides the security you need in order to respond with confidence” – CME Group

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Continue reading “7 things to know before trading Wheat Futures 4.19.2018”

RISK DISCLOSURE: Past results are not necessarily indicative of future results. The risk of loss in futures trading can be substantial, carefully consider the inherent risks of such an investment in light of your financial condition.