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I don't trade oil or natural gas, however, I wanted to add this to the conversation. When markets have real fear, like when there was the recent bank issues, liquidity providers get scared and will not provide good liquidity. If you look at the total liquidity consistently on the dom, you will notice extremely below average total liquidity on those days. To do that, you turn on the total liquidity of the top and bottom 10 levels, so that you can see the total liquidity day to day. Usually, when I look at the ES futures, the total liquidity is around 1200 to 1700, sometimes 2000 on each side. Recently on those days, the total liquidity of the ES was at 400 on each side. The liquidity providers that provide limit order liquidity to take the other side of trades were not providing because they thought there was too much risk. They have to trade some as they are paid to provide liquidity. But, the riskier it gets, the less they provide. Because of the way the market works, this allows price to move much more on less volume. Mix that with a little panic, and you have the recipe for a crash. The flash crash of May 10, 2010 was a product of extremely low market liquidity mixed a just a little market panic. I bet if you were looking at total liquidity consistently in oil futures on that day it crashed, you would have noticed that the liquidity was very, very low. If the liquidity providers think its too risk to be out there trading, why wouldn't I think its also too risky. If I want consistency in my trading, I should seek to trade in consistent liquidity environments, and stay out of low liquidity environments. I'm not talking about rocket science here. Most folks out there just don't know enough about the market to be trading it.
The CME Group is one of the largest and most important exchanges for trading crude oil futures contracts. On April 20, 2020, the May 2020 WTI crude oil futures contract, which is traded on the CME Group's NYMEX exchange, experienced a historic drop in price and traded at negative prices for the first time in history.
According to data from the CME Group, on April 20, 2020, the total volume of crude oil futures contracts traded on the NYMEX exchange was 8,848,373 contracts.
The daily average crude oil trading volume on the CME Group's NYMEX exchange can vary depending on market conditions, contract specifications, and other factors. However, as of my knowledge cutoff date of September 2021, the CME Group reported that the average daily volume for all of their crude oil futures and options contracts, including WTI and Brent crude oil futures, was approximately 2.1 million contracts per day for the year 2020.
The volume (liquidity) on that day was 4 times greater than normal daily average for the year 2020.
Although May 10,2010 was also a very volatile day but it was not a flash crash day.Flash crash occurred on May 6, 2010.On May 6, 2010, the E-Mini S&P 500 futures contract (ES) experienced a sudden and sharp drop in price, which came to be known as the "flash crash." However, May 10, 2010, was also a volatile day for the markets, with the ES futures contract experiencing significant price movements.On flash crash day 4 million plus contracts traded on CME While daily
average volume for ES for the year 2010 was 2.2 Millions.
No doubt low volume causes great fluctuations in the market but every volatile day is not necessarily a low liquidity day.Sure volatile days are risky if you don't have good risk-management safeguards in place but at the same time they present the huge opportunity to harvest big rewards as compared to risk you take as market makes huge swings.If you read the market context and use the biggest swing of the context to decide which risk reward strategy best suits to that particular time we can make in that particular day what we otherwise make in weeks or months.
Liquidity is not the issue of retail traders who hardly play individually with couple of standard contracts especially in ES market.In ES market there is hardly any slippage beyond couple of ticks even in low liquidity environment.
If we back test our tools and strategies and if they have positive expectancy we need not fear,
Just keep on going with our strategies and keep adapting ourself to the most current market behaviour we will get our targets.Market will never behave as we wish it to be, always we have to adopt ourself to market conditions.
Market behaviours are not innumerable but only three in my opinion.
1-Steep declined or inclined movements (on nose to toes or toes to nose days, it may be aggressive or a slow grind).
2-Upward swing movement in long trend and don-word swing movement in down trend.
3- Range bound price action (mostly after or before a big move days)
So if you have about 3 strategies for a particular market they will cover all market conditions.
This repetition happens over and over and over.
Just we need to use the most appropriate for that particular market for that particular time.
Off-course this is not easy it takes a lot of effort, research and practice to develop that skill and to make those strategies.
So whatever works for you just make it a second habit with practice but in my opinion we should never trade without a proper risk-management strategy if we do so, sooner or latter we will be hitting our head in a brick wall.
Thoughts in this post are just my knowledge and experience of my last 15 years in trading and are not presented here to win any arguments.Every one is unique and special and possesses unique ideas.So please keep sharing and keep adding value to this forum.
What I do is selling strangles..............That's all. You got the capital required, you can do it, too. Worst case, do very wide iron condors to reduce the margin requirement. It is almost the same. A ten (10) point wide iron condor, or credit spread will require $1000 margin, a 50 point wide will need $5000 margin, and a 100 point wide a $10000 margin. Trade according to your capital and only strangles. Leave alone the straddles and the "synthetics".....Have happy trading.
Many stocks and futures have very lucrative option premiums, just go ahead and them and if you need to defend your position once in a while then defend it and go on to the next trade. There is no 100% trading method. Once in a while you give something back as long as is less than what you keep.
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What I do is selling strangles..............That's all. You got the capital required, you can do it, too. Worst case, do very wide iron condors to reduce the margin requirement. It is almost the same. A ten (10) point wide iron condor, or credit spread will require $1000 margin, a 50 point wide will need $5000 margin, and a 100 point wide a $10000 margin. Trade according to your capital and only strangles. Leave alone the straddles and the "synthetics".....Have happy trading.
Many stocks and futures have very lucrative option premiums, just go ahead and get them and if you need to defend your position once in a while then defend it and go on to the next trade. There is no 100% trading method. Once in a while you give something back as long as is less than what you keep.
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Um...what is all this crap. Save your time and energy and worry about your own trades. I'm good on my Natty positions. I didn't even read past the first sentence.
Although this is a futures forum, I wish to highlight the extreme risks of short strangles. Maybe it can be applied to options on futures, but for options on futures, these are counted as 2 legs (instead of one), so there is no capital efficiency in trading them so I don't under why the retail traders want to trade these at all.
Anyway, I starting trading options since 2000. For short strangles, you make money if the market moves very little or the implied volatility (IV) is constant or goes down. If the market moves abruptly or if the IV shoots up suddenly, the position is screwed. The risk is unlimited for a very small profit (that is capped). The analogy I give is like picking pennies in front of an oncoming train. Yes one can make money 8 put of 10 times. But it is the 2 out of the 10 times that get you kill. If the position is under water, adjustment is hard, so it doesn't make any sense to me in terms of risk management.
Not a big deal. Natty up 7%. I'm not looking for a discussion on natural gas.
Have a great day. This thread is about indicators I thought but it has evolved into something else which people are reading so that's good.
I will say when someone shows you or tells you their positions the best thing you can do is just be quiet about what they are doing and worry about what you are doing.
I sold 2 at 2.155 holding the rest.
I didn't use an indicator but natural gas is extremely oversold with almost all indicators no matter what you decide to indicate.
What is this method? Can you encapsulate the basic approach or setup?
Persistence! Nothing in the world can take the place of persistence.
Talent will not ... nothing is more common than unsuccessful men with talent.
Genius will not ... Unrewarded genius is almost a proverb.
Education will not ... The world is full of educated derelicts.
Persistence and determination alone are omnipotent! Calvin Coolidge
Perhaps you missed my original reply to you so I will repeat here.
Those results are very impressive! How did you do it? What was your basic strategy?
Persistence! Nothing in the world can take the place of persistence.
Talent will not ... nothing is more common than unsuccessful men with talent.
Genius will not ... Unrewarded genius is almost a proverb.
Education will not ... The world is full of educated derelicts.
Persistence and determination alone are omnipotent! Calvin Coolidge