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Long Natural Gas 2012-10-12

This is an update on my long natural gas position. I made my entry on Oct 10, you can view the trade here: Oct 10, 2012. My entry occurred at 6:31 in the morning, my time, at a price of 3.47. I set a stop and have been trailing it. My stop is currently several points above my entry price, ensuring me profit. Prices rallied favorably on Thursday after the EIA announcement. I am hoping for more profit. I will exit this trade either when MACD shows a divergence, or when my trailing stop gets hit.

Let us look at a chart for November natural gas futures to better understand my entry and exit strategies.

natural gas futures trading, swing trading
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The yellow arrow is indicating my long natural gas trade entry at 3.47. Note that prices had moved up sharply the trading session prior to my entry. Then, note that prices returned to their moving average (the yellow line), and it was near the moving average that I decided to enter. This is a swing trade, and is an example of swing trading. Note that after briefly hanging around the moving average, prices resumed their upward movement causing me to gain profits. This is how swing trading works. You identify a trend, in this case price was moving up. Then, you wait for value, in this case the prices returned to their moving average, and you enter a trade and set a stop loss. You then wait for prices to continue trending, or to hit your stop. Swing trading.

How do I know when to exit? I feel comfortable enough that I am going to keep my trailing stop loose enough not to be triggered by typical daily range movement. I will do this in wait of an MACD divergence signal to exit my trade. What will this look like? In the above chart, we see two red lines. One line demonstrates higher price peaks, the other line demonstrates higher MACD peaks. As long as MACD continues making higher peaks as price makes higher peaks, then I stay long. As soon as MACD fails to make a higher high on a new price high, I either exit the trade or I tighten my stop dramatically. A situation where MACD fails to make a new high along with new price highs, is an MACD divergence.

In other markets, I am patiently waiting for gold to show value. I believe this will occur in the mid to high 1600's, but only time will tell. I am starting to feel like this may occur within a month's time, but we'll see. I am perplexed by the US dollar index, so I sit back and watch and wait. There is no sense in gambling there. I'm sure there are lots of folks that know what is going on in that market, but I don't. So be it. In sugar, we have seen a dramatic tumble in prices this week. Boy oh boy am I ever glad I exited my long position at a good profit, and didn't re-enter into a long trade! However, I am still looking for an opportunity to get long in sugar. Patience is a virtue.

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