Natural Gas Futures 2012-10-10

I have entered a long position in natural gas. Entry price was 3.47 at 06:31 (my time). As always, I am using a trailing stop on this trade to limit my risk exposure.

This is a swing trade, as prices appear to be in the beginning of an upward movement after consolidating in the 3.40 range.

Ideally, I would have liked to have bought closer to the moving average at 3.45. However, I didn't want to miss my chance to get long, and 3.45 is within my risk allowance if prices go against me before moving in my direction. We'll just have to wait and see what develops. As of now, I'm long in this case of energy futures trading.

Let us observe the 60 minute chart for the November contract of natural gas.

trading natural gas

You can see my entry area in the yellow circle. As you can see, prices didn't exactly get to the moving average, but in these trending markets sometimes you have to take the opportunities given. And then, sometimes prices go where you wanted them to after you've already bought.

The orange boxes on the chart are showing a flimsy MACD divergence. No, the second bottom wasn't lower than the first. And on this chart density, you can barely tell than MACD was higher. This MACD divergence, if you can call it that, is not textbook but neither is the downtrend before it. It seems as though natural gas may be in a bit of a sustained upward movement going back a couple of weeks here. I made my trade, I set my stop, I may get bitten in the butt.

Incidentally, I should probably mention that I'm trading the e-miNY contract. This contract is for 2500 mmBTU. Each cent, 0.01, is worth 25 USD. A change in price from 3.40 to 3.50 is worth 250 USD instead of 1000 USD as with the regular contract. This e-miNY contract is liquid enough to trade, as price spreads are rarely more than half-a-point. I'm trading the e-miNY because I have had difficulties trading natural gas properly in the past, and until my records indicate a strong win-loss ration, I don't want to commit to trading the full sized contracts.

Previously, I had been attempting energy futures trading with this product by using price breakouts with tight stops on the 60 minute charts. I was also trying to do MACD divergences on the daily charts. It didn't work for me, and I ignored this market for a while. I watched it passively in the background for months. More recently I've started simulating MACD divergence trades on it, and had moderate success. In the past month or so, I've been doing real trades using the MACD model on the e-miNY contract. I'll do an effectiveness evaluation in a few weeks, or a couple of months, probably around the turn of the year in late December.

In other markets, I'm still waiting for gold to cheapen up. I'm still watching the dollar index passively. I'm watching sugar. I was planning on buying into sugar during this recent consolidation, but I changed my mind and decided to wait. My attitude on the direction of sugar may change soon. If so, I'll be looking for a short position. Only time will tell. For now I'm cautiously bullish on sugar, but I have no open position there. I am very pleased with my last sugar trade.


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