How I trade Crude Oil with Dutchess.ai predictions.

First off I am a software/data engineer, not a financial expert. I do have experience in the financial industry, but as a developer. I am a technical trader in my spare time and I have created machine learning ai models to support my trading decisions. I have put the technicals and the results out there for free. This article is for educational purposes. Use the indicators at your own risk. I do.

This isn't really for beginners even though it may be helpful. If you're just starting. Start slow. 

There are two main ways people trade. Fundamentally or Technically. This would be considered technical trading.

Futures trade in contracts not shares like stocks. But you can think of a contract as a share for our purposes.

Currently I trade QM is because the eminis represent a fraction of another future. In this case that parent future is CL. QM however has lower margins, and a higher tick value than CL. Making it a good choice for a beginner. QM ticks are 0.025 valued at 12.50 a tick. CL ticks are 0.01.  This means a $50 gain in QM is a $100 gain in CL. Keep in mind this means you can use these indicators on CL if you prefer to trade that instead of QM. I would not recommend beginning to trading futures with anything less than $3000-5000. More if possible. And only trade 1 contract at time to start.

I find the most useful indicator to be resistance and support lines. As well as the average price traded from the previous day. Usually these are called pivots or pivot points. See the image below.

Screen Shot 2017-09-28 at 11.50.52 PM.png

The Purple line is the previous day's average. The green lines are support lines. The red are resistance. Due to the volatile nature of oil there are lots of times when you can tell that the price will cross the average price traded yesterday with confidence and risk.

The Dutchess.ai Indicators

There are 4 of them:

Binary EOD Price Change

The binary Price Change is 1 if the price change will be up at end of day and 0 if it will be down.

Binary Price Change Probability

The probability the Binary Price Change. .5 and up translate to a 1 or positive change at end of day.

Numeric EOD Price Change

The predicted price change at end of day.

Polar Numeric EOD Price Change Indicator

In the case that the day's price trend does not match the binary prediction. This predictive indicator uses the opposite value of the Binary EOD price change.

How To Use Them

These are simplified scenarios for educational purposes. You should come up with your own techniques that you are comfortable with. The reverse of all the scenarios can be done as well by placing a short.

Scenario 1

Let's say as in the image above the price shot up and then came back down across the purple line and ended lower. As long as there were no other strong signs that the price will continue to drop I would feel somewhat confident placing a bet that the price will move upward across the purple line the following day at least once. If the Binary EOD Price Change indicates a 1 then my confidence is strengthened and I may place a long trade, with a stop and a limit always.

More scenarios coming soon...

Placing Trades

I use TD Ameritrade's Think or Swim platform. I am not affiliated with TD Ameritrade, I just like their platform because I can code in it :)

I use the "Flexible Grid" view in the "Charts" section with an "Active Trader" window.

Screen Shot 2017-09-29 at 12.07.26 AM.png

You can place a long order by clicking in the green column, and a short by clicking in the red. It's that easy. Set up stop and limit orders at the top.

I apologize for being so brief. I just had to get some of this down in the moment. I will be updating this with more scenarios so check back.

Best Regards,
Karl Steltenpohl
Data Engineer