Day-Trading Commodities and Navigating the Prop Firm Universe

Personal Background

2002 Graduate from University of Notre Dame

Equity Prop Trader Tape reading Opening strategies

Futures Prop Trader Technical analysis Psychological analysis

Agenda

Futures Market Overview

Proprietary Trading Firms

Technical Analysis

Trade Strategy/Examples

Futures Markets

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

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

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

Proprietary Trading Firms

Traditional Model

Profit Split/Draw/Fees

How to gain entry

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

Equity Prop Trading

Personal Experience Spike Trading/Assent ECHO Trade

Current Landscape

Prop vs. Arcade

Capital Contribution vs. Fee for education

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

Topstep Trader Chat

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

$50K Combine Example

10 or 20 trading days

5 lot max position size

$3500 profit objective

$2000 max drawdown

$1000 daily loss limit

Patak Trading Partners

Combine Live Trader

Junior vs. Senior trader

Mentoring

Morning meetings

Technical Analysis

Trend Lines

Support/Resistance

Fibonacci Retracement/Extension

Trendline

Trend lines (example)

Trend

Trend (Example)

Support/Resistance

Support/Resistance Example

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

61.8% Retrace

61.8% Retrace (Example)

CL 161.8% extension

CL 161.8% extension

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

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

Spring – Daily Chart

Upthrust – Daily Chart

Spring – 500 Tick Chart

Upthrust – 500 Tick Chart

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

Flag

Flag (Example)

Pennant

Pennant (Example)

Q &A