Delta Divergence Short Setup on Crude Oil

I noticed this nice short setup on CL today. Cumulative Delta was lower while price was higher(also it was a morning High of Day).

May 9/10 +1,231 on 44 contracts

The Profit to commission ratio was much better today, only 15% of gross. I traded late last night and all day today. I missed the morning run up because I woke up late from trading late last night, but caught the Europe reversal on CL. TF/YM were a chop fest when I traded it this morning. I am trying out DELTA Foot print charts now. Today they helped me a lot and I used them in conjunction with my custom indicators. You can see when Longs or shorts are offside. I sold the morning delta high for a decent scalp and I bought the delta low on CL mid-day but I didn't hold it long enough.

I tried doing a spread trade on COIL/WTI last night that backfired on me.
Last week we saw the spread hit a monthly low around -10.70 and today we hit a weekly high of -14.50.
What's interesting about this spread is that it acts just like any other trading product. It shows breakouts and trends. Once -12.70 broke yesterday, the trade was to go long the spread. I failed to notice the breakout and was looking to trade the spread on a larger time frame and shorted the spread, looking for a reversion to -13 when it was at -13.50 last night, but I was wrong on how far the trade would move against me and I entered at the wrong time, and I took a loss and moved on to discretionary trading. From this trade I noticed something I had been seeing for the last couple weeks that should help me further in my trading.



Basically I am looking for key inflection points in the spread at certain times of the day. Obviously with Europe close we see a closing out of positions by European COIL traders and it only seems logical for inflection points in the spread to occur around then, and as we saw today, that was the case. What we saw  happen today in COIL and WTI/CL, was short covering by COIL traders going into Europe close which made the spread widen to a peak (-14.50). Then later going into US Crude Oil Pit close we saw short covering by CL traders causing the spread to narrow(-13.70). We saw the spread revert about 80 cents from trough to peak after Europe close. Taking the knowledge from today's spread trade, we knew that Europe Coil traders were short covering going into Europe close. This was a good hint to CL traders for the rest of the day that there would be a high probability for long trades to work and that there was a good chance there were shorts that needed to cover in CL just like COIL. If you look at the spread trade closely today you will see that the key inflection points in the spread trade for the day were at Europe close and Crude Oil Pit close.

Delta Footprint Charts

The key move occurred at 8:46am (11:46am EST).

Cumulative Delta goes negative @ 8:46, then price reverses and goes higher past negative Delta price level. MELT UP!

The Cum. Delta started dropping at 842.5 at a key reversal time period 11:45am (2:45pm EST)

May 6 $1,034 on 117 contracts

I woke up at 4:30am and prepared for the trading day. I planned on looking to short after the Non Farm # came out. My signals came a little soon, and I got stopped out a couple times. The goal was to look for a short on ES around 1351 or 740 on TF. The short setup wasn't clear on CL, and I ended up losing a lot in the morning entering short too soon on CL. At one point in the morning today I was short 102 on CL and short TF at 841, but I ended up covering these positions too soon to get back to break even on the day and I ended up limiting my profits for the day by not being patient with the bigger picture. It felt like time slowed down today for me. It was 10am, and I had been trading 6 hours in front of the computer and I thought it was near market close. I am so tired right now, I will post charts later and maybe some analysis. I really churned the account today and made my broker a ton from all the commissions I generated (over 500 dollars in commission). When your Net P/L is 50% of your Gross P/L, that means you are churning BIG TIME.

I am starting to think the scalp signals I am trading off of need to be clean up a bit and I need to incorporate Market Profile into a all of my trades. I would have been much better off today If I had waited for 1351 on ES and just held. Technically I did short TF at 841, but I covered around 38-39 because I was working to get back to positive on the day from sustaining losses on a bad CL short in the am. I am going to review my charts this weekend. I used stops today, and got stopped out many times, so there was some improvement. My performance would improve if I waited for volatility peaks and  faded those moves instead of entering too soon based off of a scalp signal that is crap. So, overall I need to incorporate market profile, the bigger picture time frame of 15min charts, some intermarket correlations, and scalp signals that line up better with market profile.I know I was suppose to trade on the simulator today, but I really felt the volatility was too good to pass up today and I had to work on my discipline on the real account. I need to improve on exiting losers sooner still. Also, my leverage still needs to be reduced when trading CL. I really don't like trading QM because CL is much easier to scalp, but QM is a smart choice for my given account size and discipline. It appears the market is starting to increase its daily range and volatility is coming back which is great for traders. I should make a post this weekend on improvements I will be making to my trading.

T.U. day 6 +6,611

I have been swing trading the last couple months. I initially started the trading Ultimatum with the intentions of trading everyday, however, I have been working 40hrs a week at my primary job and I got frustrated from seeing the market melt up everyday while I had a bearish bias. I went short TF a day after the SP500 got down graded only to see the market gap up 100+ points the next day. I was screwed. Down 12pts on TF at the open the next day. I had let 600 dollars of potential profit the previous day go to -1200 dollars from not having a stop. At that point I decided to turn the trade into a swing and scale into the trade. I waited and watched the market melt higher to new record highs on TF for the next 10 DAYS. I added around 850 and lost some money along the way. When the news came out on Sunday that Osama Bin Laden had been killed, the market was again at new record highs and the Dow futures were up 100pts on a Sunday night. Why would the death of OBL make stocks more valuable? I didn't believe that at all, it seemed people were euphoric and just buying because it was great news.
My account and brain were mentally hurting bad. I held through the pain with an average short position on TF at 853 while TF was at 872 Sunday night. This week, the market corrected, and I covered my short on TF today for 17pts on 3 contracts. My Ultimate goal for this trade was to see 780 on TF, but I think the market may bounce in the meantime and I will be looking to short above 834 if I can.

After covering my swing trade this morning, I went to scalping and all was good until the last hour of trading, at which point I covered my Crude Oil short at break even, and then saw it drop 20 cents, and I reversed my position on TF short at 834 to a long and lost 500 off the top into the close. Right now I am pretty pissed off at myself for trading the afternoon so badly. So I will be going over my trades and looking at my position sizing. As a trader I need to stick to one style of trading. Either scalp for a few ticks with a stop, or swing trade and scale in. Swing trading is a lot easier on a bigger account, but my account is small. Scalping requires discipline which I currently still lack (A lot of swearing at the computer screen instead of cutting losers quickly).
I think I need to trade something with less leverage so that taking a loss is not a big deal and I will improve my consistency right now. Crude Oil and TF are great products to scalp, but at this current point in time my discipline sucks.
I have 4 options-
1.Trade a reduced leverage contract like NQ, YM, or QM.
2.Scalp TF & CL and stick to stops.

3.Trade on Simulator and work on signals

With the way I have been feeling and trading, I think option 4 is the smart choice.

T.U. Net  +1,287 ( Yes, I am positive since I started the Ultimatum)

Pictures of my account near MAX PAIN- April 28th 2011

Today May 4, 2011 (the last day I logged in was May 1st, that's pretty good discipline to not look at your account for 3 days and hold for your intended target)

Trades taken in the morning , May 4, 2011

My goal was to make 1K at the end of 20 trading days. Technically I've only traded 6 days since I switched to swing trading after 3 days of trading myUltimatum. In my view, I wasn't ready to partake on the trading Ultimatum back in March , because I still had a negative mindset. I still have a crappy mindset today with regards to my trading. I need to go back to square one and focus on trading a method that works for me consistently. I need to build confidence in my signals and method and then I will be ready. Tomorrow, I will be on the Simulator. Current goal- get consistently profitable again on the simulator. I really want to short still, I'm really bearish on this whole market, just waiting for DX to break 73.50 to the upside and for stocks to fall.
"I will feel a sense of loss from not participating in the market if we do drop and I am not short." It is this mental shortfall that has caused me to suffer as a trader the last 6 months. Regardless of where the market goes today or next week, in order to get back on track to trading consistently, I need to forget where the market has been or where it should be and just focus on the signal and scalp trade that is in front of me and accept the stop loss when it comes.
This Blog is an Ego Motivational tool. Knowing that people read it helps motivate me to improve my trading.
Thanks for reading, Comments are turned back on, yeah ego!