Day Trading

Category Archives: Day Trading

Here is a subject that a lot of people don’t understand at all. Day Trading can be risky. So, it is something that you should stay away from unless and until you are absolutely sure about what you are doing.

There are a number of items about Day Trading such as the minimum mantaince requirementand more that need to be taken into consideration. With the blogs and write-ups listed in this section, you can learn a great deal about day trading.

We at Cannon Trading can help you understand the different concepts of trading and present you with the latest information on the same. Our team of professional and smart people can help you in your day trading transactions and more. In order to understand day trading more clearly, we advise that you go through all the write-ups listed in this category archive on Day Trading.


Trading Crude Oil Futures

June 13th, 2018 Filed under Commodity Brokers, Commodity Trading, Crude Oil, Day Trading, Energy Futures, Futures Broker, Futures Trading, futures trading education, Options Trading, Trading Guide | Comment (0)

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.

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.


Day Trading Comex Gold Futures – Contrary to Conventional Wisdom

June 11th, 2018 Filed under Day Trading, Future Trading News, Gold Futures | Comment (0)

Day Trading Comex Gold Futures

(Contrary to Conventional Wisdom)

 

By: John Thorpe, Cannon Trading Senior Broker

Markets are forward looking. Today’s price is as much a reflection of yesterday’s fears, needs , wants and desires as the current reaction to a political leader rattling sabers, or the effect that a surprise Government Report  will have on the prices of a security or commodity.

Contrary to conventional wisdom, Day Traders tend to be well educated and well capitalized.

Risk takers, by any other name, Wildcat oil drillers? Computer geeks working out of their parent’s garage? Mom and Pop managing their hard earned 401k’s; The Day trading approach is not very different from any other investing approach, with one major distinction from other risk takers who operate on a much greater time horizon.  As a day trader, you open an investment and close an investment between sunup and sundown and often many times during a market session.  One of the greatest risks that day traders must avoid is gauging their success or failure within that same sunup to sundown time frame. I like to call this a fiction trap. A fiction trap occurs when the day trader believes that once he has a good day trading, his subsequent days will always yield the same results. The fiction trap results in unrealistic expectations for success.  The Market, like the ocean current, is sometimes similar in repetition, but rarely identical in motion. When risk takers begin the process of assessing a strategy, they do it with the long view in mind.

By taking a longer view of returns, like all other risk takers, you can avoid the fiction trap of unrealistic expectations by incorporating the Rule of 72 into your long-range plans. The Rule of 72 is a formula that tells you how quickly (given a rate of return) it will take for your account size to double. Although your account size can double in one day trading futures, it is rare to hold on to those gains. The Rule of 72 forces you to be patient, emotionally subdued, and in line with long-term goals.

As with any risk taking, timing is key. A day trader needs to become:  a scientist, a student of the discipline, a tester, a collector of data, and an executer of plans.

With any project, the scientist keeps good notes and uses the microscope (technical indicators, charts, et al.) to determine the intersections of volume, price. This approach yields more accurate results than a random approach, such as throwing darts at the WSJ securities settlement page to find the correct asset and the correct position. Doing the homework and creating a practical plan should lead to positive results.

I like day trading in the Futures markets because with no more effort than buying a position, you can just as easily sell to open a new position.  In other words, if you have ever sold a stock or ETF short, you know you can short the asset by requesting from the stock loan department shares of a stock to borrow so you can short it.  Now patiently for an uptick to assume your position. This can be a time-wasting exercise when split-second decision making is required.  For this reason and this reason alone, day trading futures makes far greater sense than day trading stocks or ETF’s.

 

What I want to accomplish with you in this draft is to lay out a blueprint for day trading the NY Comex 100 oz. Gold futures contract, traded electronically through Globex.

 

 Factors Affecting Gold Prices

As part of the road map to the price discovery process, be aware of the London fixing times, or ocean currents, then can determine our Comex Gold prices. You can find charts and data points available like the one below from the U.S. St Louis Fed

https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM

You may find, upon research, that you have an identifiable price pattern around these times in the Comex market equivalents. Allow your research to guide you. These prices from London represent settlement prices for the fabricators, miners, hedgers and speculators from which they close their daily business dealings.  These fixings are as variable as the US Market prices are for gold. The US Market pays attention to the London market, and although not fungible, they are interchangeable in price discovery. London watches Comex and Comex watches London. The auctions are run at 10:30am and 3:00pm London Time for gold and 12:00pm London time for silver. The final auction prices are published to the market as the LBMA Gold Price AM, The LBMA Gold Price PM and the LBMA Silver Price Benchmarks.

Scarcity or the perception of scarcity and lack thereof drives market sentiment.

Markets are forward looking. Today’s   price is as much a reflection of yesterday’s fears as anything else. So we need to anticipate market price impact from Governmental reports, increases and decreases in potential supply or demand,

Central banks have quite a bit to do with the value of the “Yellow Metal” based on how they perceive the underlying economy’s strengths and weaknesses and whether they print money or not, by increasing or decreasing the velocity of the sovereign nations’ cash supply.  When a Central bank adjusts the Nation’s supply of dollars of their native currency, Gold will typically behave reciprocally: More dollars in circulation, value of gold increases, fewer dollars in circulation, the value of gold decreases.

During large chunks of the 20th century, the world’s central banks were net suppliers of gold. After spending their early history accumulating gold to back up national currencies, central banks sold more gold than they purchased after the U.S. dollar became the de facto world reserve currency under the Bretton Woods Agreement.

In recent years, however, the trend has changed. Central banks have become net demanders of gold, which puts upward pressure on both production and retail costs. As some sovereign currency markets are in a constant to variable state of flux and turmoil due to political upheaval or disequilibrium in their balance of trade and payments, investors residing in these countries buy gold to use as a safe haven asset to offset the risk of holding their assets in their sovereign currency.

As with any worthwhile endeavor, a true student of any process understands addtional  research should be done to thoroughly understand the potential  risks and rewards from either day trading or position trading, or with equal vigor, engaging in short term or longer term investing of any kind.

As Greek philosopher Aristotle thoughtfully observed and written for us to learn from over 2000 years ago,  “Bring your desires down to your present means. Increase them only when your increased means permit.”

What Aristotle was saying (as it applies to investing) is to use risk capital only. Risk capital is capital that, if lost in the pursuit of reward, will not impact negatively your ability to take care financially of any of your current obligations, nor will it negatively impact your current lifestyle. This statement is also true for day traders to focus on the risk they are taking on in their own accounts. Just because you had a few good days trading doesn’t necessarily mean you should put more of your account at risk and increase the size of your trades exponentially. This happens all too often and turns successful day traders into unsuccessful traders in the intermediate term, and in many cases these traders end their trading because what was once a growing account with a tempered approach becomes one great big washout.

  1. No distractions, clear the table, shut the door, unplug your devices-FOCUS
  2. Perspective- where has the market been ( long term and intermediate term charts and try to identify the reason for large price moves in either direction
  3. Just because the market is open 23 hours, don’t try to physically trade the market for 23 hours, your money will burn out faster than you will. A quote I like is “the Market can remain irrational for longer than I can be solvent”
  4. Define your daytrading timeframe. (for example: 8am-10am, 2pm-4 pm), set it, and stick to it for at least 30 trading days. Markets have the tendency to behave similarly day in and day out during the same time frames. Remember, like currents in an ocean, markets are sometimes similar in repetition, but rarely identical in motion.
  5. Research – Know the market you are trading. Research it, understand what makes it move. Who the players are in the cash market.
  6. Stay informed – Know the recent daily dollar volatility of the market you are trading. I like to take the past 30 to 45 days for the Aug  Comex 100oz Gold contract. For example, I recently used 30 trading days and arrived at $1220.00. I took the distance between the high and low of each full day, totaled them, added 30 data points together for an average daily range and multiplied that by the value of a tick in the gold  ($10.00)
  7. With my trading platform I have the ability to adjust the time frame to include only the time I  have set aside to view the market. In my research I  will also have a full daily chart

a weekly chart

And a monthly chart

of August Comex Gold  which will show me the critical areas of technical support that I can apply intraday to my abbreviated chart.

Why is dollar volatility Important? (see above) – You can manage your expectations here; you now know you shouldn’t expect to make 2,000.00 on a single trade and you can better gauge how many contracts, and how much risk you can take, on each trade. You now have a template of recent activity to better judge expected volatility without having to utilize an expensive add-on or chart indicator.

8) Call – Please speak with your broker on the phone to determine the appropriate amount of risk capital you need to trade your plan in the Gold Futures Market.

The Comex Gold Contract trades in Chicago through a registered Broker. www.cannontrading.com

Gold Contract specs are as follows:

Quoted in Dollars and Cents per Troy OZ.

Minimum price fluctuation: $0.10 per troy oz.

Symbol GC or GGC

Initial margin requirement: $3,410.00

Maintenance requirement: $3,100.00

Hours traded: 6pm EST Sunday, through to Friday at 5pm EST with an hour break each day between 5pm and 6 pm EST

As always, lean on your broker for guidance, call him or her and discuss what your risk tolerance levels are. Where to use stop loss orders or options to hedge your trading plan to ensure you leave yourself with a fighting chance.

Disclaimer: 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.

 


Which Market Should I (day) Trade? + Support & Resistance Levels 5.21.2018.. #ZW_F #ES_F #NQ_F #RTY_F #SI_F #GC_F #CL_F

May 21st, 2018 Filed under Day Trading, Future Trading News | Comment (0)

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

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Dear Traders,
Which Market Should I be (day) Trading?
1. Know and follow more than one market. I think one should have familiarity and follow about 5 different markets ( or more depending account size and time) in general.
2. Understand what type of market conditions you trade better in? Volatile? “dead”, choppy or perhaps trending?
3. Have a view of these markets from longer term outlook and behavior.
4. Trade the markets that fit your strengths.
 
Example: If I am following gold, crude, bonds, mini nasdaq and mini SP for educational purposes….If I know that I trade better in markets that have larger intraday swings and volatility than lets say trending markets or “quiet markets” I would be focusing on the mini NASDAQ as my primary market now days as it is the one fitting my profile the best.
 
If “choppy” markets suits my trading style better, I would probably look at gold as of recently.
 
This will change as markets go through different cycles, from lower volatility to higher volatility. Trending to choppy etc. 
 
Etc. etc. etc. 

If you like to set up a time and chat with a licensed series 3 broker, please contact us.

Read the rest of this entry »


Day Trading Crude Oil Futures & Levels 4-18-2018

April 17th, 2018 Filed under Crude Oil, Day Trading, Future Trading News | Comment (0)

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

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Dear Traders,

With the energy numbers coming out tomorrow, which impact crude oil quite a bit, I thought it would be a good time to share this article I wrote once again:

Crude Oil Futures volatility offers a “different market personality” than stock index futures. Here is some of the things you need to know about day trading crude oil futures:
By: Ilan Levy-Mayer, Cannon Trading Commodities Broker & VP

Crude Oil is one of MY favorite futures market for day trading. Before I dive in and share with you how the volatility in crude oil fits my risk tolerance for day trading and provide a couple of chart examples, we should review some of the specifications of Crude Oil Futures.

Crude Oil Futures have monthly expiration. So each month we trade a different contract month, so one needs to know when is the first notice day and last trading day for crude oil futures in order to always make sure we are trading the proper month with the most liquidity and avoid any chance of getting into delivery situation.

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Day Trading Mind Traps 3.07.2018

March 6th, 2018 Filed under Day Trading, Future Trading News | Comment (0)

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

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Trading 102: Day Trading Mind traps 

“One way our brain helps keep us safe is to protect us from an awareness of our weaknesses. The brain believes that it is better to be falsely confident than recognize the real risks. This protective mechanism tends to work against us in trading.” Kenneth Reid, Ph.D

MINDING THE MIND

The mind can play tricks on us. Intuitive Trading is an attempt to mind read the market, which makes us susceptible to whipsaws. Hindsight Bias causes traders to underestimate the difficulty of trading, while Competency Bias causes us to over-estimate our abilities. These are mental banana peels that set us up for a fall.

INTUITIVE TRADING

Intuitive trading is a natural response to excessive randomness and non-linearity in the market. But making informed guesses is not the same as formulating a rule-based pattern-recognition system that gives a trader a true edge. Without a rule-based plan, intuitive traders expend a great deal of energy mindreading the market, which will not improve your odds of success. In fact, professional traders make a good living exploiting the emotionally-driven behavior of intuitive amateurs.

Read the rest of this entry »

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