How to Start Trading Crude Oil Inventories with 3 Rules in 2018

Posted in: Day Trading, Trading Article


Crude Oil Futures is not only an active market to trade but is also one of the most popular instruments available to day traders.  That makes trading Crude Oil a wonderful opportunity for traders to make additional income or a stand alone income producing market.

crude oil futures volume

That graphic is a recent snapshot of the daily volume from May 26 – June 29 and you can see that volume often exceeds 1.5 million contracts traded per day.  It is a liquid market and getting in and out of your trading position should never pose an issue which is vital for day traders.

Being stuck in a position or suffering from extreme slippage can have a tremendous impact on your overall trading profits.

In a moment, I am going to show you a real inventory release trading session that was covered in the live trading room but let’s cover some basics first.

 

Crude Oil Contract Specs

  • Contract Units – 1000 barrels
  • Product Code – CL
  • Exchange – Nymex
  • Minimum Price Fluctuation – $.01 per barrel
  • Contract Months – Jan – Dec

 

Our Favorite Crude Oil Trade

Every trader has a favorite time to trade and at Netpicks, trading Crude Oil 2 minutes after the weekly inventory release is ours

The weekly inventory numbers ( Energy Information Administration ) are released on Wednesdays at 10:30 a.m. New York Time.  This is an extremely volatile time to trade as the numbers represents the change in the number of barrels of Crude Oil held in reserve by commercial firms.

Why is this important?

Crude oil is a driver of prices of many items given it is still the number one energy source in the world.  When the supply of crude oil goes down over the long term, we can expect the price of crude to increase which will increase the cost of virtually everything we buy.  If we see a higher supply of crude oil and demand is not keeping pace, the price goes down.

We see the price of crude oil impact inflation rates, the price difference between the USD and CAD, and impact the growth of the economy.

Trading crude oil on these days after the release can able you to keep your trading day short and in profit as opposed to lengthy day trading sessions.

 

Live Crude Oil Trading Video

Coach TJ recorded a crude oil inventory trading session and I want to go through some very important aspects of that trade day.  Pay attention though because this is a quick one minute trade that enabled all traders that took the trade to walk away from their trading screens for the rest of the day.

 

Rule 1:  Stand aside for 2 minutes following the inventory release

release1

What this graphic shows is the immediate effect on price the release can have.  This is a strong thrust in price with obvious highs and lows put in after the inventory release. While you may be thinking that was a quick path to profit, the fact is that you would have a very difficult time being able to trade this unless you were long the market before the release.

This is why the inventory release trading plan has our traders sitting aside for 2 minutes following the release.  Getting caught wrong footed in this market during this time can have devastating effects on your trading account.

 

Rule 2:  Get in sync with printed trade

This rule states that whatever setups has printed on the chart before our 2 minute hold time is up, we will try to get the entry price and take part in the trade.

release2

Using the Counter Punch Trading System, you can see the dots on the charts and these represent:

  • Entry price
  • Dynamic and multiple exit prices
  • Stop loss price
  • Even trailing stop prices

The setup with the yellow arrow was the newest setup that occurred after the release and is the one traders would take.  You must be quick to enter your price into your broker platform but that is the nature of trading such a volatile time in the crude oil market.

Getting in sync is all about not missing a winning trade when the setup that prints during the release is still active.  Because the setup is still active, this means that the trading conditions are still “on point” for the setup and it would be foolish to not get involved in a trade that could potentially be a huge winner especially if you are able to trail your stop for bigger gains.

 

Rule 3:  Follow the targets that are printed on the chart

One of the best things about trading where your targets are printed on the chart is that there is zero guesswork.  It’s simply a “If at this level, do this” and you know in advance what those price levels are.

release3

These price targets are dynamic which means in a wide ranging markets, your profits will be further out to take full advantage of the bigger price moves.

In slower moving markets that are trading tight, your profits (and stops) will be closer to the entry price to avoid sitting through draw down as you wait for a bigger move that never comes.

Many traders have said that seeing the prints on the chart helps keep their emotions in check.

  1. They don’t hold on past the dynamic targets (unless trailing) in hopes of the home run trade.
  2. They no longer jump into a trade because price action “looks good” but wait for the trading strategy to “invite them in”.
  3. Their stop loss is the line in the sand and taking their stop, even the trailing stop, has protected them from devastating losses.

Even though trading the Crude Oil Inventory report can be a crazy time, using a proven trading plan and a trading strategy that has help “tame” the crude oil market so you can profit from it, is something we at Netpicks are very proud of.

We want you to be a part of it.

 

Take A Walk Through Our Trade Room

You want to see all of this live and to help you do that, Netpicks wants to offer you a free trial of our trade room where you will see trades as simple as this take place virtually every day in other markets as well.

Here is our trade room link where you can sign up today.

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CoachShane

Trader at Netpicks
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.

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