Day-Trading Commodities and Navigating the Prop Firm Universe

1. Day-Trading Commodities and Navigating the Prop Firm Universe

2. Personal Background • 2002 Graduate from University of Notre Dame • Equity Prop Trader • Tape reading • Opening strategies • Futures Prop Trader • Technical analysis • Psychological analysis

3. Agenda • Futures Market Overview • Proprietary Trading Firms • Technical Analysis • Trade Strategy/Examples

4. Futures Markets

5. Market Participants Hedgers Speculators Farmers, Manufacturers Hedge against future price risk Lock in price margins Benefit from risky nature of futures markets Provide liquidity Does not intend to take delivery

6. Characteristics of Futures • Margin • Different from equities/options • Determined by exchanges • Expiration • Monthly and quarterly • Leverage • Control large amounts of a commodity with little capital

7. Crude Oil Futures (WTI) • Traded on NYMEX/GLOBEX • 1000 barrels/contract • Margin = $3,740 • $10/tick • Pit Hours: 9:00am – 2:30pm • Avg. Daily Volume = 210,000 contracts • Avg. Daily Range = $1.70

8. Proprietary Trading Firms • Traditional Model • Profit Split/Draw/Fees • How to gain entry

9. Prop vs. Retail Retail Trading Prop Trading Keep 100% of profits Need substantial capital Responsible for support Profit split No capital needed Access to software, community, etc

10. Equity Prop Trading • Personal Experience • Spike Trading/Assent • ECHO Trade • Current Landscape • Prop vs. Arcade • Capital Contribution vs. Fee for education

11. TopStep Trader • Education & Recruitment • Chat room • Product rooms • Energies, Metals, Equities, FX, Interest Rates • Guest Speakers • Dr. Andrew Menaker, Ron Feinstein, Anne-Marie Baiynd, John Bougearel, Wally Labuz

12. Topstep Trader Chat

13. TopStep Trader Combine • Used to evaluate trading talent • $30K, 50K, $100K and $150K accounts • Evaluation Metrics • Can not hit daily “loss-limit” • Achieve profit objective • Winning day percentage > 55

14. $50K Combine Example • 10 or 20 trading days • 5 lot max position size • $3500 profit objective • $2000 max drawdown • $1000 daily loss limit

15. Patak Trading Partners • Combine  Live Trader • Junior vs. Senior trader • Mentoring • Morning meetings

16. Technical Analysis • Trend Lines • Support/Resistance • Fibonacci Retracement/Extension

17. Trendline

18. Trend lines (example)

19. Trend

20. Trend (Example)

21. Support/Resistance

22. Support/Resistance Example

23. Fibonacci Retracement/Extension • Most important retracement is 61.8% (Golden Ratio) • Key Zone = 61.8% - 78.6% • 38.2% - 50% is used as a trend indicator • 161.8% extension used for targets/support/resistance

24. 61.8% Retrace

25. 61.8% Retrace (Example)

26. CL 161.8% extension

27. CL 161.8% extension

28. Trading Strategy • Top-down view to find levels • Fibs • Trendlines • Highs/Lows • Focus on the psychology of the markets • Springs/upthrusts • Flags/pennants • Momentum – used for entries at key levels

29. Springs & Upthrusts • Provide excellent risk:reward situations • Immediate feedback • Occur on all timeframes • Powerful with the trend • Spring • An immediate rejection of a previous low • Upthrust • An immediate rejection of a previous high

30. Spring – Daily Chart

31. Upthrust – Daily Chart

32. Spring – 500 Tick Chart

33. Upthrust – 500 Tick Chart

34. Continuation Patterns • Flag Pattern • Sharp move higher/lower • Tight consolidation near highs/lows • Continued move higher/lower • Pennant Pattern • Forms in top of uptrend/bottom of downtrend • Series of lower highs/higher lows • Continued move higher/lower

35. Flag

36. Flag (Example)

37. Pennant

38. Pennant (Example)

39. Q &A