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I've entered a trade in natural gas futures on the February 2013 contract. Entry price was 3.41 at around 10:30 in the morning, my time. As always, a stop loss order had been entered to minimize risk exposure.
I have exited my last natural gas trade, as it was short, yesterday afternoon shortly after the market opened. I was fortunate enough to exit within one point of the low. I took nearly 20 points out of the market on that one. I was quite satisfied.
The criteria for this current trade is on both daily and 60 minute charts. We will look at the daily criteria first, to determine why I began looking for a trade in the 60 minute time frame. We will then look at the 60 minute chart to determine the specific entry criteria.
The scope of this trade is meant to be a little bit longer term, due to the fact that there is a good signal on the daily chart. However, a fast exit could occur if an exit signal shows itself on the 60 minute chart.
In this case, a bias will be given to more leniency on the 60 minute chart to stay in the trade as long as possible. That means that a trailing stop loss might be the exiting trigger on this one. I will be keeping the stop tight at first, since I entered the trade at a much higher price that I had wanted.
Let us observe the daily chart for February 2013 natural gas futures.
We can see here in the daily futures trading chart that natural gas prices have encountered some amount of support in the 3.30 range. The last bar didn't quite make new lows, but we do see that the MACD histogram has risen substantially. It would take a pretty serious new low to cause the MACD to make new lows here.
This is telling me to look for buy signals on the 60 minute time frame futures trading chart.
Let us observe the 60 minute chart for natural gas futures.
Again, we see that there is support just above the 3.30 area. We didn't see new lows in the last few bars, as
I would have liked. I had a pending order to buy in that zone, but it was never triggered. Rather, I took a secondary buy signal after the price had crossed the center moving average (yellow line).
Price crossed the moving average with strong MACD values, this was my cue to look for a value entry. I decided to buy in the 3.41 range after prices regressed slightly toward the moving average after a couple of bars had closed above the moving average. Buying like this essentially makes this a swing trade on the 60 minute time frame.
I had really wanted to buy in the low 3.30's for this trade. After than, I would have preferred to get in right on the moving average at 3.40. However, I feel that daily chart is fairly strongly bullish and I decided, after thinking about it for 4 hours, to enter above the moving average.
The back ground principle behind the trade in and MACD divergence, although not really, and rising MACD values on price support on the daily trading time frame. Waiting for perfect MACD divergences can take forever. Some markets fail to make full divergences consistently, but do come very close regularly.
If you stick to just a couple of markets, you can learn these behaviors in your commodity or stock and trade these situations profitably. Switching markets all the time will leave you guessing no matter what you're trading.
If I see significant price resistance in the 3.50-3.60 range on the 60 minute time frame, I might be forced to exit. However, ideally I would like to see some type of stronger upward price dynamic to the 4.00 range based on the daily chart interpretation. It may not be a continuous ride. All I can really hope for is to get my stop loss above break-even, and anything beyond that is candy.
I have mixed experiences with natural gas futures trading. I tried doing it about 3 or 4 different times with limited success or failure. I had been trying to apply to wrong techniques in the wrong time frames. This last attempt at trading this product, has been going on for about 6 months now, and I am very pleased with my results. I feel like I am now in tune with this market to a degree that justifies continual monitoring and active trading involvement.(by active I mean watching the 60 minute charts daily).
In addition, I've found myself leaning away from trading the USDX on a 60min basis, especially the moving average swing trades. I've found myself much more conservative in taking 60 minute MACD trades and holding out almost exclusively for daily time frame MACD trades. Speaking of which, I'm smelling one coming up soon, we'll see if it chooses to manifest itself. I've found a similar trend to be occurring in my sugar trading.
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