Hi guys, hi from Andrea Unger! Today, I’d like to talk a bit about the Energy Market and, more in particular, of Energy futures.

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

The four main futures in the Energy Market that can be traded with a systematic approach are:

  • Crude Oil (Light Crude Oil – CL);
  • Gasoline (RB);
  • Heating Oil (HO);
  • Natural Gas (NB).

There are also other futures, but these are the best ones to focus on when you decide to develop something on energy futures.

They are all on the NYMEX and are all pretty much liquid. Please, keep in mind that two of them (CL & NG), are not very liquid during the night session.

So, if you want to develop something throughout the 24 hours that are available for trading, focus on the Crude Oil; then, consider Natural Gas as a second choice and Gasoline and Heating Oil better only for the day session, because entries during the night session might cause higher degrees of slippage, which we don’t obviously desire. These markets have good features for systematic trading.

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

Gasoline and Heating Oil are good for intraday breakout systems as well. However, trend-following approaches are very good, because the lack of liquidity leads to a higher inefficiency, so, when the trend starts, it tends to continue.

Natural Gas responds well to countertrend strategies, even though we know that there has been a huge downtrend. In any case, it sometimes tends to go back to a mean reverting behaviour. So, you can try to find something in that direction, when developing your systems.

In terms of stop-loss, I think 1.000-1.500$ are normally good for all of these on intraday, and a bit large if you go overnight. However, they are a good reference point. You can also find something with, let’s say, 600-700$.

Obviously, it would be quite hard for that kind of strategy 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 on the Energy Market!

Stay tuned, we’ll get more stuff on other markets.

Ciao from Andrea Unger!

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Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years. I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again. Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets. Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.