Discover Your Next Trading Step w/ this Test >>

Listen to “How to Trade the Energy Market” on Spreaker.

Hi guys, hi, from Andrea Unger.

Today I want to talk a little bit about Energy Futures.

Energy futures, these are the four main futures available to trade with systematic trading, there are others, but these are those you should focus on when you decide to develop something on energy futures. First of all, they’re all on the NYMEX.

Crude oil, gasoline, heating oil, and natural gas. All these are pretty much liquid. So good futures. A part of these two (CL & NG), in the night section they are not so liquid.

So, if you want to develop something throughout the 24 hours available to trade, focus on crude oil, consider second place natural gas and consider gasoline and heating oil better only for the day session because entries during the night session might cause higher degrees of slippage, which obviously we don’t desire. These are markets with good characteristics for systematic trading.

Crude oil responds well to many kinds of approaches, so it works well with trend following but also counter-trend and bias, so you can really develop plenty of strategies on crude oil and get a good basket of trading systems.

These two are good even for intraday breakout systems but, in any case, for trend following are very good because the lack of liquidity leads to higher inefficiency so when the trend starts is more right to continue.

Natural gas responds well to countertrend even though we know there has been a huge downtrend but, in any case, it tends to go back to a mean reversion behavior sometimes, so you can try to find something in that direction when you develop your system.

In terms of stop losses, I might say 1000-1500$, are normally good for all of these. On intraday and a bit large if you go overnight but more or less this. You can also find something with, let’s say, 600-700$.

Obviously, that kind of strategy would be hard to work in a clean way because this market needs a certain degree of room to move. That’s a matter of fact. In any case, all these are good markets to develop systems on.

I hope to see your systems.

Stay tuned, we get more stuff on other markets.


Discover Your Next Trading Step w/ this Test >>

What do you think about this post? Don’t forget to share your thoughts in the comments below!

And if you think the content is valuable, feel free to share it with your friends! 🙂