Trading the Oil on Iran Nuclear Deal news
in today's video what we're going to have a look at is a skill set that we teach people in our fourth week of a career course how exactly do you trade unscheduled news how do you generate a plan to trade it how do you understand whether a market has scope to movement what's priced in and then how do you go about actually executing the trade and managing the position once you're in that a trade that can take in some cases 10 15 minutes to play out how do you deal with the fluctuations how do you scale out of the trade and then add back in at the right time we're going to look at all of these types of things i'm going to use an elite traders execution to show this this is the benchmark this is the standard that you want to try and achieve and you can get there with the right framework the right process this is doable so if you want to see more of this and more different ways that our elite traders execute trades not so much news but looking at footprint trades order flow trades come and join us in a workshop i'll be there i'll be able to answer questions for you as well to explain the details behind some of the other trades and how we go about creating this framework that allows our traders to grow continually and over various different market environments click the link below and i'll see you at that webinar what we're going to go and look at back to march the 3rd and this was the iran nuclear deal tweet a lot of discussion recently has been about in ukraine we look at the iran nuclear deal tweet and source is coming out explaining this could be on right give you a bit of context then the iran nuclear deal was a deal entered in by iran and world powers in exchange for not progressing their nuclear armory world powers would lift sanctions on iran and thereby allow them to produce and sell more oil 2018 donald trump scrapped this imposed sanctions back on iran iran's oil production has then been squashed since biden has come in the negotiations have restarted to get this deal back through iran reduced nuclear armory sanctions are lifted now the implication of this is quite significant iran currently is the 10th biggest oil producer in the world with sanctions lifted iran is going to start to jump up towards competing for fourth fifth place as the world's largest oil producers go so quite a significant jump a very very big boost oil supply at a time when oil markets ideally could do with this think of the inflation implications so to give us a bit of context there's one thing to understand the fundamental narrative the next thing is then to understand the market implication i did a video on this last year looking at a different version of an oil pricing event and the same kind of applies here as the story gets talked up potential is there it doesn't mean that the deal is done so you're moving essentially down the market pricing you know as the as the possibility of the deal comes through theoretically oil prices should move status quo with sanctions imposed this is the priced into the oil market no sanctions 1.3 million barrels of oil could come back online or a price theoretically can drop that's the potential and that's the impact if it is done the other important thing to bear in mind and we'll look at charts in a moment is sensitivity oil markets as we know at this point in time early march and still are exceptionally sensitive because of the ukraine's dory the ongoing uncertainty around that oil markets have moved a long way and they're very sensitive to movement this plays into the idea of this move potentially giving you a lot more than you might expect in more sort of stable periods so let's go and have a look at where markets are this is a little look at wti this is your daily on wti and the move just over the recent few days running into this story oil has moved up around about twenty dollars in about four days this is a huge movement 20 move in four days this is the structure on a 60 minute and you can see just how stretched the market is in the couple of days leading up to this story so you now have a lot of people long taken advantage of this movement therefore you also have a lot of people who are going to look to profit take any negative news can have a much bigger impact the same applies to brent brent has put in an equally large move another 20 on in brent taking us up to around about the 115 area and you can see that move coming in here as well brent has put in a slightly bigger move brent has a bit more sensitivity to middle eastern conflict the reason being what goes into the brent price and what goes into the wti price now for those of you who don't know huge amount about commodity futures the futures market is used as a benchmark so a certain standard of oil is implied in the wti contract and the brent contract now the different contracts relate to different physical oil and so the way physical oil is priced is they'll take the benchmark futures contract and they will then price each sale of barrels of oil depending upon their quality either plus or minus brent plus or minus wti now wti directly u.s oil so it is impacted more by the us domestic situation than global middle eastern oil is sold based on the brent benchmark therefore brent is more sensitive to these types of movement more supply of middle eastern oil a greater impact comes into brent that's the difference that's why you would expect brent to move further just to explain this a little bit more illustrate it further this is the brent wti spread what this shows as we move into negative shows that wti is lagging behind brent so the further negative this goes the wider the brent is trading higher than wti as therefore the greater sensitivity to the movement when you get the turnaround so let's go and have a little look at how exactly this trades and we'll come back towards the end and look at the different phases of this and how you question through the movement okay so we're gonna go and have a look at the ladders have a look at this trade to take this trade on looking through the different phases of the move now we have a link check it out below to the complete uncut version of this parts of the trade i will sort of skip through slightly but i'll tell you when we're doing that as we move through the flag and we're going to look at the full end to the trade and how you can also play a reversal on a move like this so let's get going main market we're looking at of course is wti over on the left hand side now at this point pretty stable we're trading at 113.70 tweet hits you start to see a little bit of movement and then he jumps into the trade so it's about 30 ticks before he gets in as he moves on side as he will typically do adds very very quickly to the trade so very quick up towards around about 150 lots you see the last 30 going on now oil's moved about 100 ticks and notice we're not put the chart up there's no focus on a chart at the moment it's all about what's going on on the ladder so 100 ticks very fast move this is typically the point where you will start to see a little bit of bounce in oil as such small scaling out but it's scaling out as the market drops now you see a very quick drop we've gone from 112 50 112 111 76 trades this is a point where you would expect to start reducing a bit of size and this applies later on as well 200 ticks pretty much that we've got this is the chance that people are going to take to profit take that exhaustion move from 50 down to 75 around about 75 ticks is a great reason to start to reduce trade or reduce position so with this in mind starts to reduce position down we've gone from 150 down to around about 69 starts to lock some profit in and this is where we then move into the flag phase now if you go back and think about the potential the sensitivity that the market has at the moment yes the sensitivity suggests that you are going to get a very choppy zone here and this moves about 100 120 tick range as such you have to kind of feel this through and say right well i've got some of my position out i've banked some profit pnl is now up to around about a hundred thousand so he's in a good position but we're now going to move through this flag area we spent six minutes in this zone this is hard and this is the bit where isaac got himself caught out trying to get on to that second phase of the move now this is where you do out as a trader have to say to yourself right i've got my position we know that there's a lot of potential in this trade due to market sensitivity and the positioning much higher so by building this position up or maintaining position you're giving yourself the greatest chance of maximizing this trade even if it does take time before the move gets going so trying to maintain position here now you will notice there may be a couple of skips in time as i say if you want to see the full uncut version check the link below you see every step all of the order flow through this six to eight minutes but what he's trying to do is trying to build this position you know trying to get some more onto the trade to try and maximize the break of this currently forming flag bear in mind we've only been in the trade for around about two or three minutes so this is the the pull back phase we're around about 100 ticks off the low skipping up towards 113 so at this point pnl started to drop as you can see he's gonna he's aware of this but the piano is still much better than it was he's still 50 grand up on the trade and it's the potential that you've got here which is the reason why you don't just give this up if of course it now starts training back above 113 where we've seen this recent pullback then he may well consider getting out of the trade but whilst we're sort of in this volatile consolidation phase you can accept this it's uncomfortable absolutely but think of the wider goal in your trade so tries to add to the trade a couple of times this is where the potential grows now zandy's comments come out this alerts traders to the to the opportunity this is why having a really strong tweet deck knowing who you should be focusing on is so important once that gets retweeted by amina bakker who has got so many more followers market sensitivity grows and this is where then he starts to bring brent in so he's got a brent ladder up now brought that in built a small position in brent now as i talked about we do have the majority of traders actually are trading wti but by bringing brenton you get a very similar move but also knowing the importance and context of this being a middle eastern uncertainty you expect brent to be the one that's going to lead this move so note where we are the wti low on that first drop came in at 111 76 the brent low down here at 114. bearing in my brent was trading higher to start with so that's not a surprise that the lows are different but look then once the brent move starts this leads that's why it's so important to be able to see both markets that's why he's now trying to position in brent this can guide the movement in wti equally if brent goes and breaks the low this could push him on side which allows then the ability to add to the wti move wti is still around about 75 ticks from its low there you go brent through the large order drops down so now our position in brent continue holding the position in wti we've got a round about a total of 100 120 lots across both markets and this is the important this is the bit that we're looking at if you go and have a look at these two moves the wti move we're starting off from up here the brent move is getting in once you've already broken the low so brent's clearly leading this move and you then get the last couple of minutes of the move in brent that puts in another 200 ticks down the wti move much more limited it's that awareness that the brent now is essentially just pulling on the wtr remember that's a us product does it really have the same impact and the only reason it moves because the spread between the two so here we go wti get into the low 111.76
he's built a bit more position up he's got 80 knots in now on this expecting this suck down as wt as brent continues brent's putting 100 ticks wti finally reaches the low 75 ticks lower and now starts to accelerate as well so bill's the position up in w2i ti to make the most of that move this is why you hold on to the trade p l is now up to 200 000 so very quickly as soon as the brent move starts and it starts to push on as soon as the news starts to be accepted more widely this is where the next leg of the move is and so whilst it's uncomfortable to sit through that chop phase always think about the wider potential of the trade that you have so now seeing wti still round about 100 ticks nearly through the low brent now pushing 200 plus and so now it's starting to scale the positions down we've got a wti move that's now put in pushing on 300 ticks from the beginning brent pushing 300 plus as well it's now time to start scaling this move out think through the phases of the move we've gone through the first phase which is the whip down consolidation second leg and that's what we're now seeing at this point during the second leg you're now starting to take some profit think about what others will be doing as well others who are in from the beginning are now thinking right we're on a second leg down let's take some profit scale out of the trade so you notice now positions are not being added to we've gone from around about 100 short in wti 50 short in brent to now around about 25 and 15 across each of those and continually sort of just drifting these positions out so at this point reasonably happy with the trade you know it's a decent performance he's up around about just shy of 300 000 on the trade so in a good situation on this one and so then just continue to scale this out as you would typically expect this is the way that he will typically do this but the key bit early on was that sitting with a reasonable amount of size by scaling out you've given yourself enough p l to be able to sit through that discomfort as the market starts to rotate in that eight minute period so moving forward then we have jumped forward we're now going to be moving towards this is around about 20 minutes after the trade what we're looking at then is the final leg there's your low in wti that comes in at 110 51. that's a pretty significant level that we're looking for a break and then you get this big acceleration down this is your exhaustion face so still got a 20 knot position we're looking now for a kind of final exhaustion i want you guys to think about this in terms of the opportunity that you get not just to make the most of the exhaustion phase but when you see this that fast blip there you go 80 ticks down he cuts and reverses the trade this is looking for what i would call a bonus trade here that when you get this exhaustion move you can get the chance to take a bit more out of the trade on the long side like we saw on that very first blip down but you see it again now it's just done another 100 ticks to the downside and again so we've just moved just shy of 150 ticks now this of course is uncomfortable but as we know with exhaustion moves because people have been forced out there are no more sellers down at these levels typically you would expect the market to bounce here and that's why he's willing to then add a bit on to try and then scalp some of this trade back it's a difficult trade to take on it's a very uncomfortable trade to take on but with the extreme volatility you expect to bounce he's had to manage this he's not expected it to do that extra 150 and as such not really taking much out of the trade but the key to this as well if you're playing for these extra few ticks small size he's doing this with a five like he's trying to take advantage of maybe a hundred tick bags but doing this with five to ten lots not the hundred that he starts off with on this trade so that's your kind of final phase your final exhaustion whenever you see that it's a great indication the move is pretty much over it's time to get out it's time to move on with your trade that's the key bit to that one varying your conviction one of the key aspects of this trade is taking that first part on with decent size scaling that out this allows you to sit through the chop and then hitting it once more as the end part comes the conviction is different the long position is essentially a scalp you'll make you're taking advantage of that situation of that move you're not trying to play this as a much bigger fundamental trade that's why it's smaller size you try to take the most out of it you playing the bounce after that liquidation so there we have it that's the full trade as i say go check out the full version of this below to bring us back let's go and have a little look at a few takeaways and try to break these trades down this is how you want to debrief a trade break it down into phases you have the first 200 ticks and this looks quite insignificant no this first drop on the initial news you then have the flag part of the trade that's the little bit in the box what i would call the second wave move this is where brent gives you the opportunity to play that final drop and then the very very exaggerated auction lower an exhaustion move at the end this is where the market becomes stretched this is where your bounce is most likely to come in so when you're looking back through something like this you have to question each phase to develop a way and a method of trading each part of the move the first bit of course like many others that we've seen is about getting the size on as fast as you can when the news first hits that's where the big value is by scaling this out and understanding the sensitivity and potential of the market because the way we're positioned up and how sensitive we are this is the chance to then hold your position by scaling out on that first rush lower you give yourself the chance to hold through this so you then need to question well how do you deal with this type of bounce and one of the key things to that is understanding the scope of the trade by giving yourself some p l by scaling that here you allow yourself to sit through this of course the market could come back you could come back up here and if you end up having to take a scratch on the other half of your trade you're still up on the trade but don't sacrifice good position for the possibility of it coming back on you because if you do that you're only ever going to get a small bit out of the trade he would have had maybe a quarter of his final p l if he'd done that and got out there so as you said what typically happens through these phases the second wave is all about correlation and understanding the difference between those two contracts and finally the third phase is then how do you deal with this big rush down the opportunity to play the move back and so you've got to ask yourself all the way through this well how do you deal with managing your risk how do you how do you feel in these trades as well because it's all very easy to break the phases down you've got to understand and question how you feel during these phases how you deal with that there's one thing to understand how the market moves if you understand how you deal with it you can then start to build yourself a framework to hold on to your trade better to overcome that sort of discomfort by recognizing the greater potential of your trade so there we have it the difference between isaac's video and another one of our elite traders taking this trade on think these things through yeah even if it's a small move that lasts 15 minutes break your trade down learn different phases of the trade learn how you deal with those phases i'll wrap it up there guys this is a key aspect for anybody wanting to be a trader to understand movement to understand fundamental data sensitivity pricing and the importance of it key aspects of what we teach all of our traders in the career course i'll wrap it up there have a good rest of your day i'll see you all soon [Music] so [Music] you
2022-07-18 07:41
