NATURAL GAS WINTER TRADING GUIDELINES

Please note that all updates posted here are NOT real time and have a time-lag UP TO few hours to days depending on the bandwidth available with us to post here and on twitter. The updates are meant for information only. For the purpose of trading, real time updates are critical and mandatory. 

For REAL TIME ACCESS to technical views/analysis of 25+ Commodities, Forex Pairs, Indices, Stocks, we are currently offering a FREE TRIAL

  

 

Original post - 6th Sept 2019

Posted here - 8th Sept 2019 

[Natural Gas, UGAZ, DGAZ][WINTER TRADING GUIDELINES]
 Please read carefully. Very important for NG traders

As we approach the first winter weather forecasts, we would like to articulate a few important guidelines that shall support a trading plan.

Broadly, NG shall have 3 trading opportunities from October through March

Phase 1:- A big short squeeze -> Mid-October to November end
Phase 2:- Wide range based moves -> November through January
Phase 3:- Major long unwinding -> January end to March


Standard timelines are based on observation & experience over the last few years. Actual shall depend on winter weather forecasts for that particular year.

Trading Strategy

Phase 1:- A big short squeeze -> Mid-October to November end

The best strategy here is to long & accumulate very small positions on dips in September and Early October to prepare for this phase. Once the position makes its first micro-move up and the existing position is in gains, more lots can be added to scale this position. Lock substantial gains or book profits near the peak weather forecast.

Phase 2:- Wide range based moves -> November through January

This is the longest and the most productive window. In this phase, NG shall make large $0.5 to $1.5 moves on both sides[long/short] on a regular basis based on interpretation of daily weather reports.

4 major reports shall be shared on a daily basis & NG shall oscillate in a wide range taking clues from these models. This shall open up a plethora of swing/intraday opportunities on both long/short side.

Phase 3:- Major long unwinding - End of January to March

As winter forecasts reach its final leg, a large unwinding process begins and this shall open up a short opportunity.

Discipline Guidelines

 a] Always operate with small positions and stop losses:  NG makes SlingShot moves in winter - first a major recoil trapping small traders and then shooting a large projectile. If one bets a significant amount of trading equity on one trade, margin calls & blowing up accounts shall be common. The big institutions thrive on this behavior of small traders.

 b] Abolish averaging losses and hedging: Learn to embrace small SLs rather than averaging losses & then hedging. Putting good money into bad with a HOPE that bad money shall turn good some day is not a prudent trading strategy. It never works.

 c] Do not go chasing tops or fishing bottoms: It is impossible to predict the top or bottom. So, build a mindset of multiple trades from point A to point B during winter to slowly build gains with exceptional risk management.

Any early claims predicting NG price action to 3.5, 4.5 or 6 this winter is only tossing a coin. Only the SCALE & DEGREE of winter this year coupled with the technicals shall provide some insight on the potential target. Clearly, any such estimates shall be known only when the forecasts get released.

Nostradomus, Baba Vanga predictions & HOPE don't work in Natural Gas.

Only WEATHER, MATHEMATICS [technicals] & DISCIPLINE do.