Tuesday, 16 September 2008

Crude Stop: Briefly Hit for USO, Not Yet for HOU

The nightmare on Wall St. continues. I just noticed that my stop level for my crude oil trading setup was hit this morning, if the signal was traded with the USO U.S. Oil Fund. My stops for my setups are a close below the entry price minus the largest past drawdown that the dataset has seen. The crude oil setup's biggest past drawdown was 19.91 percent. The entry price for USO on the open of Aug. 18 was $92.64, which means the stop level would be $74.20. (Update: after I posted this, USO moved back above the stop level later in the morning.) However, I traded this signal with the HOU Horizons BetaPro leveraged crude oil fund, trading in Toronto. I also halved my position size because it's a 200-percent leveraged fund. This means my stop level is actually 39.82 percent below the entry price of $28.80, or $17.33. Right now, HOU is trading at $18.20, which means I'm still in the trade. If the stop gets triggered, I might consider going short crude oil for a short-term trade, purely on technical grounds.

TAGS: crude oil, stop, HOU, USO


Anonymous said...

have you thought about introducing a sell level, similar to the stop level, but in reverse direction? could maybe help avoid what happened with the bank index: you had 20% gain at one point, but had to sell with only 2.6% as the gains were gradually reversed before you got the sell signal from the COTs.

Alex Roslin said...


Thanks for the suggestion. I've tested some price-based filters, but they tended to detract from performance and robustness. Mind you, there are no doubt many sell levels I haven't tested. Surprisingly, however, most price-based technical indicators don't work too well when you actually test them, according to David Aronson's studies. I welcome your suggestions though.