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VEGAS CRUDE OIL TRADER

V. 1.2 BY VEGAS FEBRUARY 25, 2012

This document is protected under copyright, and no reproduction either in part or in whole is allowed without the express written consent of the author.

TABLE OF CONTENTS INTRODUCTION PAGE 5

CHAPTER 1: HOW DO WE TRADE CRUDE OIL? PAGE 6 CFDs ... PAGE 6 CHAPTER 2: WHAT THE INDICATORS MEAN PAGE 8 THE DARK GOLDENROD LINE PAGE 9 THE PLUM LINE ...PAGE 10 THE YELLOW LINE .PAGE 10 THE AQUA LINES .PAGE 11 THE FOUR [4] RISK MODELS PAGE 11 THE WHITE DOTTED CURVES .PAGE 13 CHAPTER 3: TRADING SIGNALS PAGE 14 ALGORITHM INSTRUCTIONS STEP 1 PAGE 14 ALGORITHM INSTRUCTIONS STEP 2 PAGE 17 CHAPTER 4: OTHER CONSIDERATIONS PAGE 21 PLAYING THE DAILY RANGE ..PAGE 21 FRIDAY TRADING PAGE 22 THE USOIL FINGERPRINT PAGE 22 REVERSAL DAYS .PAGE 22 CHAPTER 5: CONCLUSION PAGE 22 FOLLOWING SINGALS ...PAGE 22 HOW MUCH PROFIT ...PAGE 22 APPENDIX I: Crude Oil Daily Volatility, October 2011 February 2012. [HotForex Bid High and Bid Low] APPENDIX II: INSTALL & SETUP OF MT4 AND ALGORITHM APPENDIX III: QUICK REFERENCE BUY/SELL SIGNALS GUIDE APPENDIX IV: FRIDAY 1 HR TRADING CHARTS END OF DOCUMENT

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ILLUSTRATIONS & EXAMPLES


EXAMPLES EXAMPLE 1: Buy Signal: Yellow Line Crossing OVER Dark Goldenrod 1HR USOIL EXAMPLE 2: Sell Signal: Yellow Line Crossing UNDER Dark Goldenrod line 1HR USOIL EXAMPLE 3: Buy Signal: SLOPE CHANGE Plum Line UNDER Yellow 1HR USOIL EXAMPLE 4: Short Liquidation & Long Liquidation from Aqua Line 1HR USOIL EXAMPLE 5: Exit Position on Penetration of Consecutive White Dot Count 1M USOIL EXAMPLE 6: Exit Long Position Yellow Line Crossed Under Dark Goldenrod Line 1M USOIL

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EXAMPLE 7: Exit Long Positions Market Hit Aqua Line 1M USOIL PAGE 20 EXAMPLE 8: Plum Slope Change and then Crossover Dark Goldenrod 1M USOIL

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ILLUSTRATIONS
Illustration 1: USOIL Enlarged 1 Hour Screenshot Illustration 2: USOIL Enlarged 1M Screenshot PAGE 8 PAGE 9

Illustration 3: USOIL 1HR and USOIL 1M Side-By-Side Screenshot PAGE 32 Illustration 4: 1 HOUR CANDLESTICK July 29, 2011 Illustration 5: 1 HOUR CANDLESTICK August 5, 2011 Illustration 6: 1 HOUR CANDLESTICK August 12, 2011 Illustration 7: 1 HOUR CANDLESTICK August 19, 2011 Illustration 8: 1 HOUR CANDLESTICK August 26, 2011 PAGE 34 PAGE 35 PAGE 36 PAGE 37 PAGE 38

ILLUSTRATIONS & EXAMPLES (CONT.)


Illustration 9: 1 HOUR CANDLESTICK September 2, 2011 Illustration 10: 1 HOUR CANDLESTICK September 9, 2011 Illustration 11: 1 HOUR CANDLESTICK September 16, 2011 Illustration 12: 1 HOUR CANDLESTICK September 23, 2011 Illustration 13: 1 HOUR CANDLESTICK September 30, 2011 Illustration 14: 1 HOUR CANDLESTICK October 7, 2011 Illustration 15: 1 HOUR CANDLESTICK October 14, 2011 Illustration 16: 1 HOUR CANDLESTICK October 21, 2011 Illustration 17: 1 HOUR CANDLESTICK October 28, 2011 Illustration 18: 1 HOUR CANDLESTICK November 4, 2011 Illustration 19: 1 HOUR CANDLESTICK November 11, 2011 Illustration 20: 1 HOUR CANDLESTICK November 18, 2011 Illustration 21: 1 HOUR CANDLESTICK November 25, 2011 Illustration 22: 1 HOUR CANDLESTICK December 2, 2011 Illustration 23: 1 HOUR CANDLESTICK December 9, 2011 Illustration 24: 1 HOUR CANDLESTICK December 16, 2011 Illustration 25: 1 HOUR CANDLESTICK December 23, 2011 Illustration 26: 1 HOUR CANDLESTICK December 30, 2011 Illustration 27: 1 HOUR CANDLESTICK January 6, 2012 Illustration 28: 1 HOUR CANDLESTICK January 13, 2012 Illustration 29: 1 HOUR CANDLESTICK January 20, 2012 Illustration 30: 1 HOUR CANDLESTICK January 27, 2012 Illustration 31: 1 HOUR CANDLESTICK February 3, 2012 Illustration 32: 1 HOUR CANDLESTICK February 10, 2012 Illustration 33: 1 HOUR CANDLESTICK February 17, 2012 Illustration 34: 1 HOUR CANDLESTICK February 24, 2012 PAGE 39 PAGE 40 PAGE 41 PAGE 42 PAGE 43 PAGE 44 PAGE 45 PAGE 46 PAGE 47 PAGE 48 PAGE 49 PAGE 50 PAGE 51 PAGE 52 PAGE 53 PAGE 54 PAGE 55 PAGE 56 PAGE 57 PAGE 58 PAGE 59 PAGE 60 PAGE 61 PAGE 62 PAGE 63 PAGE 64

INTRODUCTION
All markets have different personalities and volatilities but many things remain constant throughout markets. As you might expect, as volatility increases in a market, things get more crazy and daily ranges expand. Intra day volatility expands and we get some very nice moves that make your hair stand on end. More importantly, any particular small loss on a trade can be offset with other profitable trades simply because the market is so volatile. You can expect wide intra day swings that save you from a single losing trade. In other words, volatility makes you money. The Vegas Crude Oil Trader was actually first developed for the gold market many years ago, if and when gold ever exceeded 1.75% [or higher] daily volatility [based on its nominal value] on a 20 day rolling moving average of the daily range. At golds current value of approximately $1,700 per oz., 1.75% would imply daily ranges of a minimum of $ 30. While gold has had ranges that exceed $30 in a day, they are few and far between these days, and never have come even close to $30 on a 20 day rolling moving average. If, in the future, gold does exceed 1.75% and stays there, this is the basic algorithm I would use. Crude oil has had daily ranges consistently above 1.75% of its nominal value for quite some time. In Q4 of 2011, average daily ranges were approximately 2.83% based on $100 per barrel oil. They were 3.14% based on $90 per barrel oil. While crude oil volatility has dropped somewhat in sympathy with other markets lately[most notably gold and Dow 30], its current 20 day rolling moving average as of February 24, 2012 is 2% based on $100 per barrel oil. [For complete tables and stats on daily volatility for crude oil, see Appendix I, Crude Oil Daily Volatility, October 2011 February 2012.] This makes the Crude Oil CFD or futures [more on CFDs later in the document] a perfect instrument for trading. This algorithm was developed for traders. If you like positioning trades for a longer time frame, then this algorithm isnt for you. This algorithm incorporates a floor trader mentality; we trade it during the day forget about it at night and attack it again the next day completely ignoring the previous day. Every day has its own technical signals and rules to deal with and follow. I have taken the original gold algorithm and modified it for crude oil.

I have intentionally written this document under the assumption you have never read any of my work, dont know how I trade, or are familiar with my trading methods. You dont need to read anything but this document in order to trade crude oil. So, new traders are welcomed and encouraged. For a limited time, Im also making this available to the general public with no strings attached. Im doing this for 3 reasons: 1) to help those traders that need and want a solid algorithm to make money on their own, 2) to raise awareness of how to trade extremely volatile markets and promote your own research, and 3) to give the trading public and my PAMM clients the ability to see the what,where,when, and why of my trades that I do for my PAMM http://pamm.hotforex.com/managerdetails/?l=58974123512456235450421&usermode=0 By having the algorithm, you will better understand the nature of my trading, and at the same time can see a verifiable track record of the algorithm results.

CHAPTER 1: HOW DO WE TRADE CRUDE OIL?


There are only two practical ways to trade crude oil. [There are other ways, but they are on the fringe of trading, so Im not going to talk about them.] The first is through futures contracts. The first is at the NYMEX [New York Mercantile Exchange, a division of the Chicago Mercantile Exchange]. A 1 lot in crude oil [the minimum] represents 1,000 barrels of WTI [West Texas Intermediate Light, Sweet] crude oil. The second is at ICE [Intercontinental Commodity Exchange]. A 1 lot in crude oil [the minimum] represents 1,000 barrels of Brent [British North Sea] crude oil. You need a futures account with at least USD $ 7,000 for each 1 futures contract you trade in crude oil. The second [and in my opinion the best] option is through CFDs [Contracts For Difference}. CFDS A CFD is a pure financial derivative based on an underlying asset. Basically it is a bet between you and a third party [usually a bank through a brokerage house]. In Europe and the U.K. it is popularly called Spread Betting. Today, there are CFDs on just about everything that is traded electronically.

At HotForex, there are 2 CFDs for crude oil. One is the US WTI Oil and the other is the UK BRENT Oil. While you are free to trade either, the deepest and most liquid market is in US WTI. One [1] CFD in WTI oil [as well as Brent] represents 100 barrels of oil. Two [2] CFDs would represent 200 barrels of oil, etc. Both WTI and Brent oil are quoted in dollars and cents per barrel. So, if the market is 108.00 bid - 108.05 offer, the house is willing to buy it from you [you are a SELLER] at One hundred eight dollars and no cents per barrel, and the house is willing to sell it to you [you are a BUYER] at One hundred eight dollars and 5 cents. HotForex maintains an even $0.05 spread almost at all times. [This is a very good spread. Many other brokerage houses are at 0.06 to as much as 0.08.] The market is open for trading about 22 hours of the business day [5:00 PM through to the next day at 3:00 PM Chicago time. On Friday it closes at 3:00 PM Chicago time for the weekend. It opens again Sunday afternoon at 5:00 PM Chicago time.]. The best time to trade is from about 7 AM through to 3:00 PM Chicago time. Some days, weeks, and months things can be volatile in Asia and Europe and you are free to trade these times if you want; there are no restrictions regarding time. Most of the time however, the best market conditions are from 7 to 3. Dont carry positions through the dead hours of 3 PM to 5 PM, nor ever take positions home over the weekend. You got plenty of time to make money in an 8 hour trading environment in a volatile market. If you plan on making trading a career, then heed my warning about taking positions overnight [through the 2 dead hours] or over the weekend: DONT DO IT. Margin is USD $ 200 per each 1 CFD. So, while the margin at NYMEX for 1,000 barrels is about $7,000, the same margin in CFDs [which would be 10] is $2,000. If you so desire, the bang for your buck can be much greater with CFDs. So, if you buy 1 CFD in WTI at 108.00, and then sell it at 108.01 for a $0.01 gain, you would make $1. There are no commissions when trading a CFD. NOTE: If you have issues regarding CFD trading and wish to trade the NYMEX micro crude [1 barrel per contract], mini crude [500 barrels per contract], or full crude [1,000 barrels per contract] contracts offered at the CME, then that is fine with me. Simply find a US based broker and open a futures account. However, use the MT4 trading platform and open a demo account with any offshore broker that trades WTI as a CFD [HotForex for example]. Install the custom indicator Vegas Crude Oil 1HR and the Vegas Crude Oil Trader as outlined in Appendix II and use the signals to trade your futures account.

Chapter 2: What the Indicators Mean


I am assuming you have everything up and running and both custom algorithms, Vegas 1HR Crude Oil Trader and Vegas Crude Oil Trader are installed on the appropriate charts. If you need help, see Appendix II. When you enlarge the 1 hour, it should look something like this: Illustration 1 USOIL Enlarged 1 Hour Screenshot

There are 5 colored lines on this chart: 1 plum, 1 yellow, 1 dark goldenrod, and 2 dashed aqua. There are also white dots. The purpose of this chart is to determine which side of the market to be on for trades. I dont personally trade directly off the 1 hour because its function is to give me the proper information for being either long or short. Every single trading day there is an easy way to make money and then there is the tough way. Do yourself a favor trade on the easy side life will be much more pleasant for you. Follow the signals and dont trade by the seat of your pants.

When you enlarge the 1M chart, it looks like this: Illustration 2 USOIL Enlarged 1M Screenshot

Just like the 1 hour candlestick, there are 5 colored lines on this chart: 1 plum, 1 yellow, 1 dark goldenrod, and 2 dashed aqua. In addition, there are the white dots which I will explain in a minute. There are different mathematical relationships intertwined in different time periods. As you will see, these relationships provide excellent trading signals. So, the 1 hour is used for direction and the 1M is used for trading the signal from the 1 hour. From the 2 illustrations above, I will now explain what each of the variables represents. Please look at and study these 2 illustrations as I guide you through the explanations.

The Dark Goldenrod Line


This line is an exponential 21 Period Moving Average [LOW ONLY] on a 1M timeframe; therefore it represents 21*1 = 21 minutes. This line is an exponential 55 Period Moving Average [LOW ONLY] on a 1 HR timeframe; therefore it represents 55*1 = 55 hours. This line represents, at every given point of time, what Big Money is doing. Trust me everyone, you want to be on the side of big money. When they are buying, you had better be long, and when they are selling, you had better be short.

What matters here is NOT what prices are doing relative to this line. What matters here is the SLOPE of this line. When slope is positive, it means big money is buying the market and forcing prices higher; when it is negative, it means big money is selling the market and forcing prices lower. IT IS A MEASURE OF MOMENTUM FROM THE LOWEST PRICE OF THE 1 HOUR PERIOD, AND OF THE 1 MINUTE PERIOD The 1 Hour Candlesticks give you a great snapshot of what big money is doing relative to the market at any given point in time. Of course, big money changes its collective mind; and when they do the slope will change. The key here is to be with them, and never against them; this way you are NEVER on the wrong side of a market when it explodes and prices move rapidly! In almost all cases, when a market moves quickly, the slope of the 1H will tell you which direction you can expect any surprises to be.

The Plum Line


This line is an exponential 4 Period Moving Average [HIGH ONLY] on a 1M timeframe; therefore it represents 4* 1 = 4 minutes. This line is an exponential 8 Period Moving Average [HIGH ONLY] on a 1 HR timeframe; therefore it represents 8 * 1 = 8 hours = 480 minutes. This line represents, at every given point in time, what Hot Money momentum is doing from the highest price during the period (1 hour and 1M). These are the very short-term traders looking to scalp the market for a Pip or two. As a collective group, they are the first to 1) take profits, 2) run stops, and 3) the very first hoping to capitalize on a new short or intermediate trend. The key here is the RELATIONSHIP this group has RELATIVE to the Big Money group. By themselves, they represent nothing; it is their relationship to Big Money that gives us the necessary clue as to where prices are headed; because when big Money PLUS Hot Money join forces and have the same slope, most of the time you are heading higher if they are positive and lower if they both are negative.

The Yellow Line


This line is an exponential 11 Period Moving Average [LOW ONLY] on a 1M timeframe; therefore it represents 11 * 1 = 11 minutes. This line is an exponential 21 Period Moving Average [LOW ONLY] on a 1 HR timeframe; therefore it represents 21 * 1 = 21 hours = 1260 minutes.

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This line represents, at any given point in time, the REVERSAL of Big Money momentum from the lowest price of the period (1 HR and 1M) . It is an indicator of profit taking or NEW money coming into the market counter to the prevailing trend. The key here is the RELATIONSHIP this group has with the HOT Money group. When they join forces with Hot Money, the prevailing trend will find it hard to sustain the current momentum. By themselves and totally isolated, it is hard to measure the affect they have on prices. It can sometimes be difficult to gauge their presence, in sufficient enough volume, to know they are affecting momentum. After Hot Money, they will be the next group of traders to take profits and exit the market, establish new positions, and in the case of larger traders maybe run some stops.

The Aqua Lines


The 4 [Four] Risk Models Remember when you were first installing the Vegas Crude Oil trader onto the MT4 platform, a box popped up and I had you change the Risk Model number to 1? There are available to you 4 [four] Risk Models to choose. These 4 models relate to the THEORETICAL AND CURRENT VOLATILITY of the market IN RELATION TO A SHORT TERM EXHAUSTION MOVE. The AQUA dashed line is a price level, that if prices get there [given the current volatility in USOIL], you have VERY LIKELY reached SHORT TERM PRICE EXHAUSTION. There are 4 risk models [1-4]. 1 is the least volatile and 4 the most volatile. In the physical world we live in, is there more than one state for water to exist? Of course, when its molecular activity has slowed because of cold, it exists as ice. In its normal state, when temperatures are between 32 degrees and 210 degrees Fahrenheit [or 0 degrees and 100 degrees Celsius], it is water. In its most active state, above 100 degrees Celsius, it is steam. Water, therefore, can be said to have 3 states of VOLATILITY. In the trading realm, different currency pairs [gold is considered a currency for trading purposes], and CFDs will exhibit different levels of VOLATILITY as each trades. They each have different volatilities. For example, USDJPY is generally not as volatile as USOIL; therefore its threshold level for a price move exhaustion [where there is an extremely high probability the market price will stall and reverse] is NOT as high as USOIL.

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If you notice USOIL getting more volatile than normal [measured by an increase in the daily range], or getting less volatile [measured by a decrease in the daily trading range], you dont have to redo the entire algorithm. Simply adjust the Risk Model number from 1 4. USOIL has the following Risk Models defined for each time period. 1) Vegas Crude Oil Trader [1M candlestick] Risk Model 1 = 55 Risk Model 2 = 89 Risk Model 3 = 144 Risk Model 4 = 233 Current Risk Model USOIL = 1 2) Vegas 1HR Crude Oil Trader [1HR candlestick] Risk Model 1 = 144 Risk Model 2 = 233 Risk Model 3 = 377 Risk Model 4 = 610 Current Risk Model USOIL = 2 Note: It is very easy to change the RM. If unsure, change them and take a look at where the aqua lines are in relation to the market. On the 1 HR candlestick, if the market price is hitting the aqua lines daily, then they are too low. Remember, this is pure exhaustion, so it isnt going to happen every day. On the 1M candlestick, exhaustion levels should be hit a few times per week. If not, lower the RM 1 level. The following is a FIBONNACI number sequence: 1,1,2,3,5,8,13,21,34,55,89,144,233,377,610, The relationship each number has with the next defines a famous ratio found in nature and in trading. Each number has a precise 0.618 value from the next in the relationship [after 5]. ALL THE NUMBERS IN THE RISK MODELS ARE FIBONNACI NUMBERS. So, what do they mean? In Vegas Crude Oil Trader, for example, Risk Model 1 means the short term exhaustion point is $0.55. FROM the EMA Yellow line. So, if USOIL is trading at 108.00, and the yellow line value is at 107.90, the upside exhaustion point is 108.45. If USOIL is trading at 108.00 and the yellow line value is at 108.10, the downside exhaustion point is 107.55..

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So, the measurement is NOT taken from the current price of USOIL, it is taken from the current value of the yellow line. You do not have to calculate this, as it is done automatically for each 1M candlestick. If you look up in the upper left-hand corner of the chart, all the values are there dynamically. You can get an up-to-the-second look at where these values are during the trading day and week. The Aqua line represents SHORT TERM ACTIVE EXHAUSTION. It does not represent the NORMAL course of prices hitting a SHORT TERM high or low. The market is in a very hyper or active state; prices are changing rapidly and the market is exhibiting abnormal hyper activity that cant and wont last long.

The White Dotted Curves


Those white dots that appear on your screen are from the Parabolic Time/Price Series developed by Welles Wilder. Originally created for the precious metals markets in the late 1970s, it is now known as Parabolic Stop and Reverse, or simply Parabolic SAR. They simply measure momentum from a high or low [after the fact] and step it up/down in a parabolic form. After prices start rising/falling the Parabolic SAR kicks in and the white dots start forming a parabola. Many people use this technical indicator as an entry/exit point for their trades. I do not use it for that reason. The major weakness of this algorithm is that you can get chopped up pretty badly waiting for the market to go somewhere. In a trendless market, especially using 1M timeframes, your losses can mount quickly. Instead, I use it in an entirely different way. After a position has been initiated, if the price comes back to the white dots AFTER THE FORMATION OF 20 OR MORE OF THE WHITE DOTS, YOU LIQUIDATE YOUR LONG/SHORT POSITION. For example, if you are long USOIL and you count the number of consecutive white dots from the most recent start of the white dots, and the 1M candlestick you currently are on has a white dot below it and it happens to be the 27th consecutive white dot, then if the price comes back and hits the price level of this white dot, you exit [liquidate] your position. The Parabolic SAR has no use other than that. This is all I use it for and you can ignore it on your screen until it becomes appropriate to watch. This indicator measures the NORMAL short term exhaustion of a move in the market. It usually doesnt have the hyper activity associated with the dotted Aqua lines on your screen.

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Chapter 3: Trading Signals


Trade the Vegas Crude Oil Trader from approximately 7:00 AM Chicago, USA time to 3:00 PM Chicago, USA time. DO NOT INITIATE ANY NEW OPEN POSITIONS AFTER APPROXIMATELY 2:00 PM Chicago, USA time. Trading in Asia or Europe is your call. Some days and weeks it is active, but it can also be very dull and listless. Use your own discretion ALGORITHM INSTRUCTIONS Step 1 The 1 Hour candlestick determines whether we go long [buy] or short [sell]. 1) When the yellow line is ABOVE the Dark Goldenrod line initiate new positions from the long side only. Example 1 Buy Signal: Yellow Line Crossing OVER Dark Goldenrod 1HR USOIL

In example 1, at the timeframe of the shaded blue box and at the red arrow, you would then only initiate long USOIL positions. When you get a sell signal on the 1M candlestick, you would ignore it. Why? Because from a probability standpoint you arent going to make much if anything and probably lose on the trade.

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2) When the yellow line is UNDER the Dark Goldenrod line initiate new positions from the short side only. Example 2 Sell Signal: Yellow Line Crossing UNDER Dark Goldenrod line 1HR USOIL

In example 2, in the timeframe of the shaded blue box and at the red arrow, you would then only initiate short USOIL positions. When you get a buy signal on the 1M candlestick, you would ignore it. Why? Because from a probability standpoint you arent going to make much if anything and probably lose on the trade.

3) If the Plum line is UNDER the Yellow line on the 1 HR, pay very close attention to the negative slope of the plum line. When the slope of the line changes from negative to positive, liquidate all short positions [if any] and now trade from the long side. In other words, a new 1 hour buy signal has been generated by the change in slope.

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Example 3 Buy Signal: SLOPE CHANGE Plum Line UNDER Yellow 1HR USOIL

In example 3, focus your attention on the first blue shaded box on the left. The plum line is under the yellow line on the 1HR, and the slope changes from negative to positive If you had any short positions in the market, you would liquidate. Now, a buy signal is generated and we look to trade from the long side of the market when we get the appropriate signal from the 1M candlestick. 4) When the market price hits either of the aqua lines in the 1 hour candlestick, it is an indication of short term exhaustion in the move. If it hits the upper aqua line, liquidate all long positions [if any]. If it hits the lower aqua line, liquidate all short positions [if any]. If the aqua lines are hit on the 1 hour, it generates a liquidation signal.

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Example 4 Short Liquidation & Long Liquidation from Aqua Line 1HR USOIL

In example 4, within a short time frame, both aqua lines were hit. ALGORITHM INSTRUCTIONS Step 2 By looking at the 1 hour candlestick, we now instantly know which side of the market to trade. This is why I have the 2 charts side-by-side on the trading platform. I dont have to guess or wonder what to do; it is there visually for me, and I instantly know what to look for in a trade. Now, we turn our attention to the 1M candlestick chart for trading signals and trade initiation. ON THE 1M USOIL CANDLESTICK CHART 1) When on the 1M when the yellow line CROSSES the Dark Goldenrod line it creates a buy/sell signal to open a position. When it crosses going up, obviously you would get long; and when it crosses going down, you would get short. Remember, we are not trading both sides of the market. This can lead to account destruction. The 1 hour chart will tell us which trade [long/short] to make.

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2) Now that a position is open, you need to watch 3 things: A) Once you are in a position, the Dark Goldenrod line becomes important. Stay with the long/short position until the yellow line CROSSES over the Dark goldenrod line. At that point LIQUIDATE your position. [Note: Please do not open a new position and reverse. This is just to exit your open position.] B) Keep an eye on the White dot count. If it gets to 20 or more, liquidate your position if the white dot gets hit by the price. C) If neither of the above two conditions have happened to take you out of your position, the only thing left is the Aqua line. Any time the price touches or exceeds the Aqua line, it is time to exit [liquidate] your position. Example 5 Exit Position on Penetration of Consecutive White Dot Count 1M USOIL

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In example 5, the 1 hour is bullish. From the first red boxed arrow, notice the white dots that started at the most recent low. The second boxed red arrow is the time period of the 23rd consecutive white dot that got penetrated by the price in the next candlestick. This was our signal to get out of the long position and take profits. Example 6 Exit Long Position Yellow Line Crossed Under Dark Goldenrod Line 1M USOIL

In example 6, the 1 hour chart is bullish. Here, the first red boxed arrow is the time when the yellow line crossed over the dark goldenrod line giving a buy signal. The second boxed red arrow is the time period when the yellow crossed down over the dark goldenrod and gave a sell signal to get out of the position.

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Example 7 Exit Long Positions Market Hit Aqua Line 1M USOIL

In example 7, the 1 hour chart was bullish. The first red boxed arrow represents the time period when the yellow line went over the dark goldenrod line giving a buy signal to be long. The second boxed red arrow represents the time period when the upper aqua line was hit, thus giving the signal to liquidate the position. 3) 1M Plum line under 1M yellow line and then a slope change in the plum line from negative to positive, AND THEN PLUM LINE OVER 1M DARK GOLEDNROD LINE.

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Example 8 Plum Slope Change and then Crossover Dark Goldenrod 1M USOIL

In example 8, the 1 HR is bullish. The first boxed red arrow is when the plum line slope changed to positive; however, the buy signal didnt come until the second boxed red arrow when plum crossed over the dark goldenrod line. Appendix III is a printable guideline for all the signals and liquidations.

Chapter 4: Other Considerations


You have to always use stops when trading crude oil. I shouldnt have to tell you this, but crude can move swiftly, and leave you in a deer in the headlights mode if you arent careful. Playing the Daily Range No matter how you feel about the market, its going to put in the range for the day. Somehow, someway, its going to happen. Take this into consideration when you trade. It is a very important concept, which if you master, will make you tremendous amounts of money

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Friday Trading As many veteran traders can attest, since the inception of electronic trading, Fridays action can pose its own special problems and challenges. Since we now have basically 24/5 trading, Friday can easily be the weeks positioning day as we head into the weekend So, the questions is does crude oil fall into this pattern and are Fridays to be avoided because of industry positioning as we go into the weekend? The answer is NO. Appendix IV has every Friday 1 hour chart since the market went to a 3:00 PM [Chicago time] close on Friday, July 29, 2011. Please take some time and study this section.

The USOIL Fingerprint In a trending market, price corrections should be from 30 40 cents before the trend resumes. The algorithm is specifically designed to catch the resumption of the trend should these correction amounts hold. Reversal Days Crude Oil is infamous for its reversal days from the U.S. open. Please keep in mind that the days range can be put in in a number of different ways.

Chapter 5: Conclusion
Following Signals Its up to you to decide how many, and when, to follow the signals from the 1M candlestick. On an average day, you will be presented with plenty of buy/sell opportunities. Just remember, the range is going to get put in. How Much Profit This is a decision you have to make for yourself, but if you can make $0.50 - $1.00 / barrel each day, I would say that is very successful trading. Good luck trading everyone, and if you have any questions or comments, please drop me a line at vegasxau@ymail.com and Ill try and get back with you ASAP. -vegas Saturday, February 25, 2012

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APPENDIX I: Crude Oil Daily Volatility, October 2011 February 2012. [HotForex Bid High and Bid Low]

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***End of Appendix I***

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APPENDIX II: INSTALL & SETUP OF MT4 AND ALGORITHM


You can download a demo version of the MT4 platform from HotForex: http://www.hotforex.com On the right side of the website page is open demo account.
Unless you are already trading on the MT4 trading platform, and are familiar with its use, you definitely need to download the demo and play with it until you are comfortable. LISTEN TO ME FOR A MOMENT: Your real account can wait a few minutes. Dont be stupid: this is not about how smart you are or anything like that. It is an issue of familiarity. You need to know how to do the following:1) create a candlestick chart and modify its properties [like color of the bars, widths and depth of lines, etc.,], how to configure the market watch section so the symbols you watch are customized for you, and 3) most importantly how to enter orders, stops, etc. and also cancel orders. If you arent familiar with MT4, dont worry, its easy to use and get used to. Your demo platform is 100% exactly the same as your real live trading platform; with one exception. The only difference is that you log in with a real User ID and password that links your real money to live trading. You dont have to download a different MT4 for a live account; the demo and the live account use the same platform [there is NO difference]. The only difference is that the demo uses a different server [one that is linked to play money] than the real account. There is a specific reason why banks / brokerage houses have demos for their clients. It isnt to see how much play money you can accumulate. It is to get you familiar with the trading platform so you dont make mistakes that cost you a lot of money. If you dont play with the demo first, when you get to the real platform, and dont know how to do something, you end up losing real money. MT4 Install and Setup You now have MT4 setup on your computer. Install the MT4 application by double clicking the setup icon on your desktop and following the online instructions. When MT4 is finished, and you open it for the first time, more than likely you will get an update window. Please start the update and wait while it builds the new build version. When it is finished, an icon should be on your desktop to start the application, and you can place the setup icon in the recycle bin.

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When you first run the MT4 application, you immediately notice 4 [four] charts on the right, and sections of information on the left. The left sections are market watch and navigator. Below that at the bottom of the page are links to trade [where you can see your last trade], account history [where you can see trades for the month], alerts [where the brokerage house or bank will alert you to various trade conditions], mailbox [where the brokerage house or bank will send you messages], experts [where you will be notified of successful additions of custom indicators], and journals [where I have no idea what they load in here. Ive been trading MT4 for 5 years and never seen it used once.] Most demos dont have news feed activated; that is usually only available in your live account. You need to eliminate all the charts on your screen [we are going to build our own] by pressing on the X in the upper right corner of the chart. When all 4 are gone, there is nothing but a grey area. Over on the left hand side of the MT4 platform is the Market Watch section. Place the mouse on the right border until it changes into a directional arrow. Now, left click and depress and drag the border right until you have sized it to your satisfaction. Do this at the bottom of the page also, to get the kind of space you want for news and other informational tabs. If you place the mouse on Symbol in the Market Watch section, on the left part of the MT4 platform, and right click, you can choose which currency pairs, precious metals, oil and stock indices [CFDs] to highlight in the Market Watch section. Go up top to task bar and click on file. Choose new chart. Pick USOIL and click. A new USOIL chart pops up. This is the US WTI Oil CFD. Drag the chart to the upper left corner of the grey area. Place mouse on bottom border of chart until mouse changes to directional up/down arrows. When you see up/down arrows, depress and hold left mouse click and then drag to resize down to the end of the grey area. Now go to right side and do the same thing and drag chart right to the end of page [dont obscure the prices]. The chart should now cover the entire grey area. The time default is usually one hour when you create a new chart. Go up top and click M1. The chart now changes to 1 minute from 1 hour. Up top next to Expert Advisors on the right, are 3 [three] choices for type of chart: chose the middle one that has the fat middle. Continue right and click 2 times the + button. Now you can see the Japanese Candlestick chart we have just created. MT4 defaults to black and white colors for a candlestick. I dont particularly like these colors for my candlesticks. For the website archives I use different colors. Place the mouse anywhere on the chart and right click. When the box pops up, chose properties. Under the colors section do the following: make sure bar up is lime [it usually is default, but if not change to lime via drop down box]; change bar down to red via drop down box; change bull candle to lime via drop down box; change bear candle to red via drop down box. Leave other boxes alone. Click OK.

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Chart changes to green and red candlestick. Green candles are up and red candles are down. Repeat this process for each chart you want available on the platform. At the bottom of the charts, you will see the tags for each chart. Simply click back and forth to get the one you want to look at. Or, you can resize them to have 2, 3, 4 or more charts up at the same time. Its really up to you how you want to view them. Installing MQ4 Files You downloaded 2 *.mq4 files from the link I gave you. You need to install these files exactly as I tell you for them to work properly. First, exit the MT4 trading platform. Copy and paste these *.mq4 files, or move them, to your desktop for easy install. Go to start>my computer> C drive. Double click on C drive and chose program files. Find the directory HotForex MetaTrader [or other brokerage house Metatrader application] and double click. Double click experts folder, then double click indicators folder. Drag and drop or copy and paste the *.mq4 files into this directory. Now close everything. The file path looks like this: C:\\programfiles\HotForexMetaTrader\experts\indicators\ Now, restart the MT4 application by double clicking icon on your desktop. Trading application will start up.

Installing The Vegas Crude Oil Trader on a Chart When your MT4 application restarts, you should see the USOIL candlestick 1 minute chart. If not, bring it up so it displays. Go up top to Insert > Indicators > Custom. The last directory will show a dropdown box. Scroll the mouse down to where you see Vegas Crude Oil Trader and click the mouse once. The Custom Indicator Vegas Crude Oil Trader box pops up. Ignore the sections of the box labeled common and visualization. There default values are always used. When the box pops up, click on the section Inputs [defaults to colors, which I do second after inputs]. Place the mouse over the numbered value in Risk Model and double click. Enter the number 1. I explain risk models and their values in the text. Right now, I am interested in getting the algorithm on your screen and teaching you how to do it for any chart. After you enter 1 in this field, click OK ONCE [Do not double click].

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Now go to the colors section. There are 5 fields labeled 0 to 4. The zero field is Plum; the 1 field is labeled DarkGoldenrod; the 2 field is labeled Aqua; the 3 field Is labeled Aqua; the 4 field is labeled Yellow. In the Plum field under Width, place the mouse on the number you see and double click. A drop-box shows up and you can pick the width of your yellow indicator [2 is good]. Do the same for DarkGoldenrod [pick 2 width]. For Aqua fields leave width alone and double click mouse over number under style [Dashed line 2 is good]. In the Yellow field under Width, place the mouse on the number you see and double click. A drop-box shows up and you can pick the width of your white indicator [2 is good]. When you are finished, click OK once. Part of The Vegas Crude Oil Trader is now super-imposed on your M1 USOIL chart. We need to do one more thing. Go up top and click insert > Indicators> and click on Parabolic SAR. The Parabolic SAR box pops up. The Visualization section you can ignore; MT4 defaults to the Parameters section. In the Step box put the value 0.03; in the Maximum box put the value 0.3; In the Style box, use the drop-down box and choose White; and in the line box to the right of the Style box use the drop-down box and chose the 3rd [third] line thickness. Now click OK. White dots now appear on your chart. What they mean is covered in the main text. Im only concerned here with getting The Vegas Crude Oil Trader up and running on the MT4 chart. You now should have The Vegas Crude Oil Trader fully super-imposed over the 1M USOIL candlestick chart. Now use the process you just learned and make another USOIL candlestick chart. Only this time it is going to be a 1 Hour candlestick. On this chart place the custom indicator Vegas 1HR Crude Oil Trader. [Note: To delete any indicator from a chart on MT4, simply place the mouse on any part of the indicator so that your screen reads a small box with indicator information, and right click your mouse. You now can select delete and indicator is gone from the chart.] Now reposition your 2 charts so they are side-by-side on your MT4 platform. The charting section of your trading platform should look something like this:

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Illustration 3 USOIL 1HR and USOIL 1M Side-By-Side Screenshot

You have the 1 hour chart on the left and the 1M chart on the right. *** End Appendix II ***

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APPENDIX III: QUICK REFERENCE BUY/SELL SIGNALS GUIDE


STEP 1 Determine buy mode or sell mode from 1HR candlestick chart. Buy Mode: 1) yellow line over dark goldenrod line on 1 HR, 2) plum line under yellow line on the 1 HR, and then a slope change from negative to positive of the plum line. Sell Mode: Only when the yellow line is under dark goldenrod line on the 1HR. If in buy mode we only make new long positions. If in sell mode we only make new short positions. STEP 2 Buying off the 1M when 1HR is in buy mode: 1) Yellow line over the dark goldenrod line, 2) Plum line under yellow line and then a slope change in the plum line from negative to positive, AND THEN PLUM LINE OVER DARK GOLEDNROD LINE. Selling of the 1M when 1HR is in sell mode: Only when the yellow line is under dark goldenrod line on the 1M.. STEP 3 Liquidating long positions: 1) When yellow line on 1 minute crosses under dark goldenrod line, 2) When upper aqua line is hit, either in 1 minute or 1 hour, 3) When 20th [or more] consecutive white dot is taken out on upside, 4) When you approach the 20 day rolling moving average on the day on the upside, 5) Any other time you want to ring the register on a profit. Liquidating short positions: 6) When yellow line on 1 minute crosses over dark goldenrod line, 7) When lower aqua line is hit, either in 1 minute or 1 hour, 8) When 20th [or more] consecutive white dot is taken out on downside, 9) When you approach the 20 day rolling moving average on the day on the downside, 10) Any other time you want to ring the register on a profit. Your profit goal should be 30% - 40% of the days range. If you can do that, or better, you will not only profit handsomely, but you are a great trader.

***End of Appendix III***

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APPENDIX IV: FRIDAY 1 HR TRADING CHARTS


Illustration 4 Friday, July 29, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Short Yes Could have made money from short signals during day

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Illustration 5 Friday, August 5, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.60 / barrel Long Yes Could have made money from long signals

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Illustration 6 Friday, August 12. 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.60 / barrel Long Yes Could have made money from long signals

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Illustration 7 Friday, August, 19, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.90 / Barrel Long Yes, very good Rally in last 4 hours

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Illustration 8 Friday, August 26, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.65 / barrel Short Yes Good drop in 3rd hour

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Illustration 9 Friday, September 2, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Short Yes Plum line never went to positive slope while under yellow, therefore short signal still applies.

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Illustration 10 Friday, September 9, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Short Yes 2nd and 4th hours provided good drops

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Illustration 11 Friday September 16, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long, then Short in 3rd hour Maybe With change in signals in 3rd hour, maybe caught 4th hour drop, otherwise a dull rest of day with not much opportunity.

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Illustration 12 Friday, September 23, 2011

Grid: 1 HR Signal: Action Good: Notes:

$1.00 / barrel Long Excellent Market went to buy mode, with plum slope going positive while under yellow, very early in the day. Great action in first and 2nd hour.

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Illustration 13 Friday, September 30, 2011

Grid: 1 HR Signal: Action Good: Notes:

$1.00 / barrel Short Maybe Market would have made you wait all day for the range, but if you stayed the course the 2nd to last hour of trading would have been great trade. Couldnt really blame you if you left for the weekend though.

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Illustration 14 Friday, October 7, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long Yes At least 2 good rallies.

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Illustration 15 Friday, October 14, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long Excellent Plenty of long opportunities in this day.

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Illustration 16 Friday, October 21, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Short to long in 3rd hour No Signal change didnt leave much for rest of day.

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Illustration 17 Friday, October 28, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long Yes Several decent long trading opportunities.

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Illustration 18 Friday, November 4, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long Yes 2nd hour starts some good long opportunities.

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Illustration 19 Friday, November 11, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long Yes Dull minor Holiday trading.

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Illustration 20 Friday, November 18, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.80 / barrel Short Excellent First 5 hours gave you all you needed if short.

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Illustration 21 Friday, November 25, 2011

Grid: 1 HR Signal: Action Good: Notes:

$1.00 / barrel Short Yes Starting in 3rd hour action from short side was very good.

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Illustration 22 Friday, December 2, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long Yes Several times getting long produced profits.

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Illustration 23 Friday, December 9, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.60 / barrel Long Yes Earlier in day, market went into buy mode with change in slope of plum line, while under yellow line.

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Illustration 24 Friday, December 16, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 / barrel Long Maybe Market went into buy mode earlier in the day when the slope of the plum line went positive, while under the yellow line. Market made you wait all day for results.

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Illustration 25 Friday, December 23, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.30 / barrel Long No, its Christmas Eve trading If I have to tell you not to trade Christmas Eve, with shortened hours to boot, then you need a vacation from trading.

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Illustration 26 Friday, December 30, 2011

Grid: 1 HR Signal: Action Good: Notes:

$0.50 Short No, its New Years Eve trading Same as last weeks message.

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Illustration 27 Friday, January 6, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.50 Short Yes First 2 hours made you your day.

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Illustration 28 Friday, January 13, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.60 Long Yes A couple of good long opportunities throughout the day.

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Illustration 29 Friday, January 20, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.60 Short Yes Several good shorting opportunities throughout day.

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Illustration 30 Friday, January 27, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.40 Long Yes A couple of good long opportunities.

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Illustration 31 Friday, February 3, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.40 Long Excellent First blue box on left was a slope change in plum, while under the yellow line, that put us into buy mode. Excellent buying opportunities all day long.

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Illustration 32 Friday, February 10, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.50 Long then short in 3rd hour No Profit opportunities few and far between.

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Illustration 33 Friday, February 17, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.35 Long No The lowest range day in a very long time for a non-Holiday.

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Illustration 34 Friday, February 24, 2012

Grid: 1 HR Signal: Action Good: Notes:

$0.50 Long Excellent Several good long opportunities for profit.

***End of Appendix IV***

***END OF DOCUMENT***

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