The Anatomy of a Crude Oil Trade – CFD & Futures Campaign

Executive Summary

This is the third article of three in this series.
Article#1: The Anatomy of a Crude Oil Trade – March2013
Article#2: The Anatomy of a Crude Oil Trade – Option Campaign Conclusion August2013

 

The Paper Trading Campaign
In each Advanced Cycles course the participants are provided with a written trading plan that is implemented with all calls being made ahead of time.  There is no hindsight involved in the paper trading so it simulates real time trading without real money.

It has been my practice since the inaugural Advanced Cycles course (March 2009) to paper trade the Dow for the 6 month period of the course.  Up to the 8th course this has happened with 7 out of the 8 campaigns hugely successful in terms of spectacular results.  The 9th course was different.  I had lost track of where we were in the Dow cycles.  This occurs sometimes in my trading and when it does I move off that entity and onto another where price is moving as predicted.  To demonstrate this process I introduced Crude Oil into the paper trading.

The paper trading started on 4 March 2013 and was set to trade long buying on every retracement (SDKM method).  My analysis was close.  Price went down until the long term low of 18 April 2013.  The downside was five stop losses.  The upside was getting in AT the low.

It is important for the ‘trader’ to have trading tools and methodologies that keep the ‘analyst’ safe when a prediction is not perfect.  This is why a trading plan is so critical.

Although the paper trading started with the June contract, here is the September contract for simplicity.  Timing remains unaltered but prices vary slightly between contracts.

The 9th course concluded on Saturday 27July and the paper trading spreadsheet was completed in the preceding week so that it could be included in the Day3 notes.

Paper Trading Results
Note that Crude Oil trades in cents per barrel.  I have set the CFD rate at $1 per cent.  QM is the Mini Crude Oil contract that trades at $12.50 per cent.

Profit = 3397 (=$339.70 CFDs or $42,463 Mini QM)
Number of Trades = 13
Profitable Trades = 3
Average loss = 101.3 (=$0.1013 CFDs or $1,266.25 Mini QM)
Mathematical Expectancy = 2.58
%Winners = 23.1 (Trading is not about ‘winners’ it is about ‘profits’!)
Profit Ratio = 14.5

Following is a System Profitability chart showing Profit Ratio and %Winners plotted.

Comments
There are two things that matter in trading:
1.  A reliable edge.  I use cycles and teach what I use.
2.  A plan that has been proven profitable in the past that you can trade.  I publicly paper trade in each Advanced Cycles course.  When you have nothing to hide you hide nothing.  My students learn what to do and watch me doing it live and ahead of time.  Let me know if you think I could do more.

I hope that you can see that these days everyone is within reach of the world financial markets.  Demonstration accounts are widely available and with a very small amount of money (say $50) you can test your proven trading plan real time real money.

Why bother?  Although it may well be the hardest thing you ever do and it may take you considerably longer than you think - the upside is huge.  Apart from the potential of blue-sky profits and thus financial freedom, there is the lifestyle.

Lifestyle is what you make it – unless you are ‘asleep’ just drifting to your grave.  Trading is the best ‘job’ in the world.  No boss, no difficult people and no set hours of work.  You can work where and when you want.  I have a mobile office and can even trade ‘on the road’.

The deadline for the next Advanced Cycles course is 24 August 2013.