# Trading US commodity futures through IB



## Pager (14 April 2008)

Has anyone used IB for trading US commodities? CBOT, NYBOT etc.

Also any idea of how they place orders in the Pit traded contracts they offer ?, would imagine if im here in Australia placing orders for a pit traded contract online there is going to be some kind of human error risk at IB,s end, also curious as to how they do that ?.


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## Trembling Hand (14 April 2008)

Pager said:


> Has anyone used IB for trading US commodities? CBOT, NYBOT etc.
> 
> Also any idea of how they place orders in the Pit traded contracts they offer ?, would imagine if im here in Australia placing orders for a pit traded contract online there is going to be some kind of human error risk at IB,s end, also curious as to how they do that ?.




Why trade them. there are plenty of commodities with cheaper brokerage on Elec exchanges??


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## Pager (14 April 2008)

Trembling Hand said:


> Why trade them. there are plenty of commodities with cheaper brokerage on Elec exchanges??




The Pit session looks to be the main trading time, after hours electronic trading is pretty thin in a lot of markets from what i can see.

Do you trade any commodity markets Th ?, i only really trade indexes at present but want to run systems on some of the more liquid commodities as well, any insight/info would be appreciated.

I'm only adding my simple system to data from pit sessions, what markets that are fully electronic could i consider ?, i would rather trade electronic than pit. 

Cheers

Pager


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## wayneL (14 April 2008)

Pager said:


> The Pit session looks to be the main trading time, after hours electronic trading is pretty thin in a lot of markets from what i can see.
> 
> Do you trade any commodity markets Th ?, i only really trade indexes at present but want to run systems on some of the more liquid commodities as well, any insight/info would be appreciated.
> 
> ...



You can trade them all electronically. Only the meats are too thin IMO. Everything else has adequate/plenty of liquidity via elec contracts.


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## Trembling Hand (14 April 2008)

All of them.
The trading pits are dying a slow death. The only floor based futs that have a higher volume seems to be a couple Agriculture Futs. All the main elec ones have plenty more liquidity.


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## Pager (14 April 2008)

Wayne and Th, do you trade these contracts for the entire session or just during the day(Pit) hours ?, looking for example at the NYBOT exchange, there commodities trade from 1-30am to 3-15pm, there is a pit session from about 8am until 3-15pm also which is what I'm charting through CSI end of day data.


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## wayneL (14 April 2008)

Pager said:


> Wayne and Th, do you trade these contracts for the entire session or just during the day(Pit) hours ?, looking for example at the NYBOT exchange, there commodities trade from 1-30am to 3-15pm, there is a pit session from about 8am until 3-15pm also which is what I'm charting through CSI end of day data.




We're talking swing or position trading here right?

Entries during pit session in most circumstances, though finding myself more and more tempted to enter out of (pit) hours, if the signal is there. Exits by stop, triggered anytime (but you have to tell TWS to action stops out of hours).


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## Pager (14 April 2008)

wayneL said:


> We're talking swing or position trading here right?
> 
> Entries during pit session in most circumstances, though finding myself more and more tempted to enter out of (pit) hours, if the signal is there. Exits by stop, triggered anytime (but you have to tell TWS to action stops out of hours).




Thanks wayne

One more question  Is slippage in most of these markets a major factor ?, I'm talking the more liquid markets that trade decent volumes and is it in general better/worse outside of the day/pit session ?.


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## Trembling Hand (14 April 2008)

Another thing with the floor base contracts is they are normally very big contracts. Unless you have some big $$ it would just make sense to start with the elec ones.


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## MRC & Co (14 April 2008)

Pager said:


> Thanks wayne
> 
> One more question  Is slippage in most of these markets a major factor ?, I'm talking the more liquid markets that trade decent volumes and is it in general better/worse outside of the day/pit session ?.




Yes, as TH says, unless you have serious $$, better to play with the smaller electronically traded contracts I beleive.

Also, you will probably get to go up against a few more novices in the YM.

Slippage would be much more of a factor outside regular cash hours.  Wider spreads, lower volume.  Other than that, slippage is not too bad, as commissions are very low, volume is good and spreads are pretty tight.  

One of the more experienced guys correct me if Im wrong.


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## Trembling Hand (14 April 2008)

MRC & Co said:


> Also, you will probably get to go up against a few more novices in the YM.





Really??


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## Pager (14 April 2008)

The markets im looking at are all on the ICE exchange they are Sugar no 11, Coffee, Cocoa and Cotton, no 2 contract.

My simple system looks to work just as well on the combined sessions data as it does on Pit/Day only data, stop is tight for example the Sugar contract would be around 15 ticks or US$168, win rate is about 45% if entering MOO, hopefully if it is hit then will be during the highly liquid day/pit session, can any of you guys comment on price action before the main session ?, looking at futursource 15 min bars from the past few days i can access its a similar story to the E-minis outside of the day session in that in general its a lower range traded and any major move will occur during the main US session.

Looking at the Website trading hours are 2-30amEST until 3-15pmEST the following day but its also saying there is a pre open session from 8pmEST until 2-30amEST  can anyone shed any light on this 6+ hour pre open as i cant find any info on the ICE site about it.

Cheers

Pager


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## Trembling Hand (14 April 2008)

Pager said:


> One more question  Is slippage in most of these markets a major factor ?, I'm talking the more liquid markets that trade decent volumes and is it in general better/worse outside of the day/pit session ?.




All the Commodities that I have traded have wider spreads & thinner order books than something like the Index Futs. The floor based Futs don't have an out of hours market. But most of the commodity futs are 24 hour contracts (gold, silver, oil etc)

With the wider spreads execution becomes more important.
I haven't traded any of the ICE products.


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## MRC & Co (14 April 2008)

Trembling Hand said:


> Really??




This is what I have read by some reputable professionals.  

More amateurs enter the YM due to the psychological effects behind the cheap point value and the fact it "appears" to move more than the ES.....

Not sure the weight to this, but I wont argue........


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## Trembling Hand (14 April 2008)

MRC & Co said:


> This is what I have read by some reputable professionals.
> 
> More amateurs enter the YM due to the psychological effects behind the cheap point value and the fact it "appears" to move more than the ES.....
> 
> Not sure the weight to this, but I wont argue........




The ES is undoubtably where the BIG BIG boys play but All Futs are controlled buy the big players. Us little guys are just on the side trying to survive. 

In any case commodities probably have a higher percentage pro's than the index Futs


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## Pager (14 April 2008)

I’m going to paper trade for a few weeks and using 1 min bars to get the worst fill for that bar as my stop.

Just for anyone’s interest, my system has me long 3 of the 4 markets today, Cocoa was a buy last Thursday, exit is by trailing stop, initial stop changes for each trade then trails after the opening bar but are usually within the same range, e.g. Sugar is between 10 and 30 ticks most of the time, contracts risked im starting with a hypothetical US$1000 risk per trade and its not usual for all markets to trigger a trade on the same day but most of the time there is 1 position open, there were no entrys triggered on Friday just the open Cocoa position with its trailing stop.

May Sugar long 5 contracts at 1234, stop is 15 points today at 1219
May Cotton, long 1 contract at 73.80, stopped out already at 73.19 (low of exit bar from future source), so loss of US$810 + Bro.
May Coffee, long 2 contracts at 130.85, stop is 1.3 points today at 129.55
July Cocoa, Long 2 contracts from 9/4/08, entry at 2300, open today was 2553, trailing stop is up to 2536


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## wayneL (14 April 2008)

Pager said:


> The markets im looking at are all on the ICE exchange they are Sugar no 11, Coffee, Cocoa and Cotton, no 2 contract.
> 
> My simple system looks to work just as well on the combined sessions data as it does on Pit/Day only data, stop is tight for example the Sugar contract would be around 15 ticks or US$168, win rate is about 45% if entering MOO, hopefully if it is hit then will be during the highly liquid day/pit session, can any of you guys comment on price action before the main session ?, looking at futursource 15 min bars from the past few days i can access its a similar story to the E-minis outside of the day session in that in general its a lower range traded and any major move will occur during the main US session.
> 
> ...




It all depends. That is true sometimes. Other times all the move is done in London on Liffe. Not all contracts are the same specs, but enough correlation to cause a gap in the NY pits. Liffe trades cocoa, robusta coffee, white sugar etc.

Looking at KC, it trades continuously from 7:30AM => 8:15PM electronically (That's UK time so NY time is - 5 hours).


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## MRC & Co (14 April 2008)

Trembling Hand said:


> The ES is undoubtably where the BIG BIG boys play but All Futs are controlled buy the big players. Us little guys are just on the side trying to survive.
> 
> In any case commodities probably have a higher percentage pro's than the index Futs




Yep, completely agree.  At least there are a few here who are surviving, which shows it can be done!  

Also read a professional trader who worked as a commodity futures broker for numerous years and stated that between he, and his colleagues, they saw no more than a handful of retail investors profit through trading commodities. 

Just another reason I am targeting index futures.


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## Pager (14 April 2008)

MRC & Co said:


> Also read a professional trader who worked as a commodity futures broker for numerous years and stated that between he, and his colleagues, they saw no more than a handful of retail investors profit through trading commodities.




Not so long ago i would have agreed with that statement but like index futures as markets go electronic the playing field becomes more even, add in cost of brokerage that has fallen dramatically thanks to the likes of IB and us little players are in with a better chance.

When i started trading the Spi brokerage was $25 a side now i can do it for $5, information and speed of execution is instant thanks to the Internet, there's no floor trader looking after his big clients first, the electronic exchange treats all orders on a first come, first filled basis.

Commodities are a different fish to fry as far as i can see.


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## Trembling Hand (14 April 2008)

Pager said:


> Not so long ago i would have agreed with that statement but like index futures as markets go electronic the playing field becomes more even, add in cost of brokerage that has fallen dramatically thanks to the likes of IB and us little players are in with a better chance.
> 
> Commodities are a different fish to fry as far as i can see.





Yes. most info out there is a generation old. As most gun traders come and go after 15 years then move on to writing books and spreading their 'insider info' most of what you read is OLD news and hardly worth the $ you are paying.

But no matter what the market is its efficency is that the big guys set the prices and the small guys try to hang on. There is no user friendy futures for the punters.


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## Pager (15 April 2008)

I got stopped out of Cotton very early , coffee traded up over 1.5 points before falling back so I remain long, trailing stop will be used when it reopens, Sugar closed a bit higher so like Coffee a trailing stop is now used and Cocoa which I would have entered last week closed basically unchanged during the session it got within 2 ticks of my trailing stop though  so I remain long with the stop staying at 2536 when it reopens.

Will trial my system for a while but im leaning to only trade more volatile markets, Sugar can on occasion have good ranges but although my system has a higher win rate on that market there nearly always small, Coffee on the other hand has a lower win rate but when you get a winner its usually a good one.


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