Trading Progress

I've now tested Bitcoin, ASX200, palladium, and crude oil futures trading using Barchart data. So far, only ASX200 futures were not profitable. I'm now trading one contract long or short of Bitcoin futures, trading palladium with position sizing using CFDs, and have put in an order to short crude oil futures.

With palladium I am aiming to risk about 10% of the CFD account on each trade. My current position is long 10 ounces of palladium and I have an order to short 20 ounces of palladium. The typical risk for trading a 100 ounce palladium futures contract is too big at this stage. The contract face value is around USD 160k. So, even if the stop is 5% from the current price you are risking USD 8000.

On the other hand, a crude oil contract has a face value of around USD 50k (1000 barrels of oil). I am targeting 5% of the face value as the risk we can take on. To compute the number of contracts we can trade we calculate: 0.05*price/abs(price-stop) and round it up or down to the nearest integer. If that is zero then we don't put an order in. This is why I only have a short order at the moment and no order to go long.

Both oil and palladium have longer optimal periods for measuring breakouts against than Bitcoin does. My palladium strategy looks for breakouts from the last seven days of prices in either direction. My oil strategy uses breakouts from the last eleven days. However, it will exit a long (short) position if the price falls below (rises above) the previous day's low (high).

Palladium has about the same risk/return trade off as Bitcoin, but oil isn't as good a risk/return ratio. Here are the average maximum potential loss and the average trade profit for trading with a single contract:

Bitcoin: Risk =  USD 3,722, profit = USD 1,036, ratio = 0.28
Palladium: Risk = USD 4,910, profit = USD 1.462, ratio = 0.30
Crude oil: Risk = USD 2,030, profit =  USD 225, ratio = 0.11

Compared to face value of the contract, the average Bitcoin profit is a 2.7% return, while for palladium and oil it is 0.9% and 0.4%, respectively. Relative to required margin, though, Bitcoin is not so good compared to the others.

The reason for trading all three of them at this stage is for diversification. I want to have more consistent returns rather than boom and bust. That's why I am still allocating the largest amount of risk to Bitcoin. I also still have a treasuries futures trade on and am long more than 100 ounces of gold via the IAU ETF.

At this point, I think I got beyond the experimental stage of trading and am now in a more developmental period. My backtesting programs work pretty well, I have good quality data, am more used to trading in a disciplined way, and am now testing which markets and position sizes make most sense.