Warrior Trading Blog

Bite Back the Crude Oil Snake +$1,320 | Steve’s Futures Pulse 199


All right. Let’s dive into a recap here of a very interesting trading session that we had here today. Volatility seems to be the new norm, actually, in the markets, and our first swing in crude oil was an 0 for 1 on a modest risk trade, and we end up coming back again. Although it’s difficult to come back to a snake that bites you, if the technical setup is there, it’s really important that, as a technical trader, you realize that a prior loss is no time to get down on the dumps and curse the market and say the market is bad.

I mean, there is such a thing as being right, but still losing in volatility. It’s, well, if you’re not used to that, it’s good to get used to that and not let it impact your trading approach altogether. So, we’re going to go over a couple of things here that we looked at this morning.

First is, early this morning it was just, I was thrilled to see this market breakdown here, and although I was unable to pull the trigger on this short side, a handful of members in the Futures Trading Room here were able to see this fantastic short sale in the E-mini S&P at 2930. So, this is not a recap of my first trade. We’ll get into that in just a moment. But this E-mini S&P, nice trade, special thumbs up to Zen in the futures trading chat room who got that 2930 sale and rode a good chunk of this all the way down before the market ultimately turned around, scored some nice greens. So, a little shout out for you there, Zen.

But let’s get into my trades for the day, because they were kind of like the tale of two trades in reality. Take my headset off here. So, the crude oil we saw go into breakdown mode following suit with the E-mini S&P, again, looks like a very similar chart, but this is light sweet crude on a 10-minute timeframe. And here’s what we did in the crude oil.

In my first trade of the day, again, having missed the E-mini S&P, and the only smile I had on my face was because I saw at least members were able to identify that market profile breakdown trade. So, that still put me in a good mood. It wasn’t meant to be in the crude oil for me on my first trade. Here’s what we did with the market over here. We initiated at 5534, which is right … I’m going to do a better job of drawing that. Right there, a little bit above that POC.

The reason I took the trade is we saw this volume congestion start to mount, okay? You see how these horizontal histograms behind the price bars started to extend over and over again? They got longer and longer as we watched this trade come to life, and then we saw the master point of control. That’s that yellow horizontal line, which represents the highest volume traded price on the board.

When that’s down below, most of the time, most often, that’ll serve as a nice little support. So, we enter that trade, but the market had other ideas. Look what the market does. It comes all the way down here. We end up getting stopped out at 5509 on this one for 25 cent to the market. I did have three units, so I gave 750 to the market to start my day. Happy Thursday, and the market grabs 750 bucks from me. All right. Not a great way to start a Thursday, right?

Well, guess what? We went on to look at a copper tray, which I’m going to cover second, but that was my second trade, and we came back to another entry in the crude oil. But while I’m on the crude oil chart, I thought I’d show you why we took the trade again. Well, here. After the flush out down below here, the market bottomed out after that last leg forward, and then I structured a trade in a very specific way, and this is a good learning opportunity for some of you.

I structured the reentry into crude, given at this time the market very well could have just kept falling. It wasn’t a lot down below. Congestion was above. Again, the same congestion here that we were using to leverage a possible long position on the first go-around now becomes resistant. So, I wanted to make sure if I was going to reenter the light sweet crude here that the market re-broke back above the POC level, which is 5532. So, I did it as a buy stop at 5534, the exact same price that we did our first entry.

It was like de ja vu, right? Here we go again. Same entry price. Are you serious, Steve? Are you really going to do this? Really? You’re going to go back to that rattlesnake that bit you once for the 750 bucks? And the answer is yes, and that’s because it takes time to get to the point where you mentally separate wins and losses, losing money, making money, from the trading opportunity, technically, on the chart.

So, yes. We in advance announced the 5534 buy stop. That triggered … This was a six unit trade, because I knew if it broke above, there was going to have a bit more [inaudible 00:04:32] coming back from the leg lower. So, we initiated again, 5534 right in this ballpark here. Okay, again, stopped out on the first try, but we initiate the long position right here, and this time exact same stop, which was 5509, right down here. So, if we were going to break back down again, I was going to call it quits at the exact same place risking 25 cents on that go-around.

Well, you can see what happened. The market spent a little bit of time here in that value area right here, right around that most popular place for the market to do business. That red zone in the background here is TAS market map and market profile telling you this is where nearly 70% of the activity occurs, so really this is not a surprising thing. When the market goes sideways here, this is the area where most traders that lack discipline and lack patience bail on the trade, because they don’t get instant payout on their hitting the buy button. So, they get out only to miss out on what ends up being a nice break to the upside, and here’s how we covered.

I covered three at 5564, which is right there, and then the market kind of went up here very close to the level I was calling out here, but it retreated. So, on the way down, I covered the other three at 68. So, all told, on my second position, given I had six instead of three, got 1920 out of that. So, again, basically wiped away my $750 loss, put myself back in the money on the green, looking good.

So, let’s go to the copper, okay? Because this was a trade that actually I was pretty optimistic about, and I’m going to bring it up right now. Here’s copper, September contract. This one is a market. This is the industrial metal, symbol HG. We’re in September here today. This is a market I like to trade, because when it sets up it has nice follow-through in daytime and swing timeframe as well.

So, anyways, first time in a long time that I’ve found a setup, finally, primed for a move, and the reason is very similar to why we took the crude oil. Big breakdown early this morning, okay? So, I was looking for the comeback trade if the market started to put in some congestion, again, some volume aggregation down below, and it did. You can see where I highlighted on that left chart.

Then the market starts to make its pilgrimage a bit higher here. You can see this. Look at, we start getting above this 25563 level. Okay? Well, guess what? I did a buy stop again, because I wanted to enter on strength, so I initiated a long, but my buy stop was 25570, got filled at 25575, a little extra slippage there on the chart.

Slippage, by the way, if you’re unfamiliar, it means when you use a order that doesn’t control price, like a limit order, which a stop order doesn’t, unless you use a stop limit. A stop order just turns to a market order when it trades at or through the price. So, a market order takes the best price available. Slippage is that difference between the price you specify and where you get filled. In the case of this market, it was five points. Copper trades $2.50 per point. So, it basically cost me $12.50.

I was really optimistic about this trade. This was a 12 unit trade for me, and after we kind of fought our way back from the crude, because remember, the copper trade was wedged in between a losing trade in crude and then a nice comeback winning trade, and then in between there was this copper trade with 12 units, because I really expected when we made that break we were going to follow through up here, okay, into these long-range bars, which I call Slip ‘N Slide bars, and make a run towards this 25650 zone, and maybe even 25710 zone up in here. I’d have been thrilled for that.

Now, it didn’t happen in the time horizon that I planned to trade today. I’m done for the day here now, and so I end up covering the trade five points higher, 25580 right here for five points on twelve units, so I made 150 bucks, enough to cover some costs and basically just add that to the bottom line.

So, when it was all said and done, 1320 across all the trades. Lost 750, made 1920, added a little 150 bucks on this copper trade. And, still watching this copper, it’s just I’m going to be away from the screen here now, so I don’t want to leave open-ended risk on this. So, it’s as much a risk mitigation move for me to, again, to get flat not carrying a risk today as it was to pursue the opportunity. So, that’s just how it works sometimes.

So, anyways, finished in the green here today. We’ll be going into Friday. Again, green for the week. Looking good and looking for hopefully a strong finish on my favorite TGI Futures session tomorrow. Thanks for those of you joining me live here in the Futures Trading Room, and come on back, and I think if there’s two big takeaways for today’s session, it’s patience pays, and you either have it or you don’t, and if you don’t, you can work on it. That’s the good news. It’s something you can work on as a trader, and that’s kind of realizing the fact that the market doesn’t move on your time horizon to make money on a trade.

So, when you get into a trade, even though it’s a break-up mode trade where the expectation is a move to happen in a certain period of time, the market really could care less on your time horizon to make money. It’s going to do it when it’s going to do it, but you got to stay true to your technicals and don’t lose faith in your strategy right out of the gates, because you start the day, strike one. Okay? It doesn’t mean the baseball game’s over. Strike one just means get back up there, dust off your cleats, and you’re still playing, okay? As long as you’re still within your risk tolerance, of course.

Special reminder for those of you that are trading with smaller accounts. Remember, crude oil has a mini contract. It trades at half the margin, half the risk, half the reward, too. So, risk on the trade, you could trim down, like the 25 cent risk trade could be basically the equivalent of 12 and a half cents. So, $125 risk instead of $250 risk.

So, there’s ways you can do futures contract selection and mitigate risk and still deploy the same strategy, but really proud. Really proud of those of you that, in the Futures Room have, over spending some months with me here, have started to understand pattern recognition and not be relying on me and just simply mirror trade what I do. Because that’s my risk tolerance. That’s my strategy, and it’s not the number one value I bring to you as an educator of trading.

My biggest value is teaching you the knowledge so that you can go on to see chart patterns and identify them totally on your own, whether you go on to use TAS market profile and the market profile method at all, or just learn how to manage risk and manage money on trades and be patient and see some of the techniques to keep your temperament, kind of even-keel and not ride the ups and downs of every losing trade, “Aw, shucks, the market,” and then you get all down and depressed and then euphorically excited on the wins.

Really, the name of the game. I know those of you have been following my videos for many months, I do like to have fun. I do like to tell jokes. I share a lot of stories about my personal life, and that’s just to add maybe a little entertainment value to keep you watching in those in-between times when we’re in between trades, and there’s nothing to do other than sit and wait.

So, anyways, look forward to doing it again with you on Friday morning. Good job, again, those of you in the room, and we’ll meet you back in markets again soon. Trade well and be well, everyone. Bye-bye.

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