EPIC the Oil Algorithm Story

EPIC the Crude Oil Trading Algorithm Started It All

White Paper October 17, 2020: EPIC V3.1.1 Crude Oil Machine Trading – 19 Week 100% Win Rate Achieved.

Please note that all times are in Eastern Standard Time (EST) relative to our lead trader’s Twitter account. Twitter auto-configures the times shown according to where you are located (this can be changed under your account settings).

The Twitter feed of our lead trader best shows when EPIC the Oil Trading Algorithm was first being tested – at which time a decision was made to tweet real-time calls so that the evidence of success or failure was time stamped and the process transparent. Following are highlights of that experience.

The reason I published this tweet was that the oil algorithm was saying that when $USOIL hits that number there will be a significant rally. At 41.20 I would be interested… I would wait for a back-test.

Here again I reiterate the alert because the algorithm alarms are ringing like crazy.

And here, once again, and a number of times that day, a reiteration. Keep in mind that am only showing a portion of the reiterations here…

Here is a look at the standard charting I used on the day of this buy trigger call. The blue arrow on the left shows where I made the call and where crude was trading at the time (what was happening at the time is that crude hit my first algo target but I didn’t start actually publishing targets that soon in the process). You will notice on the chart that crude didn’t hit 41.20 until 7:00 PM ET that night… I don’t trade extended hours or futures… so I just watched. Then the next blue arrow on the chart shows the next day at 11:00 AM ET (approx.) when crude had backtested and hit 41.20. You can see the significant spike at that point. You will also notice the alpha algo targets on the chart (the red circles) I had established with the algorithm. I knew if those targets hit with any amount of accuracy that I had the oil algorithm dialed in at that point. The targets obviously started hitting with great accuracy. I could have published the targets weeks in advance but only published them days in advance because I was concerned at the time with time/price cycles ending because at the time I did not completely understand the time cycles crude was trading in. I have a much better idea now – but at the time the algorithm was still new.

wtibacktests

To better understand the significance of this call (beyond the fact that targets began hitting with great regularity after and have continued to since) is that crude was in an undeniable downtrend and there was no reason to think a rally was coming. See the chart below zoomed out with how crude was trading before this call was made. June 8 crude was trading in the 51.50 range and had downtrended since… and then our lead trader tweeted the specific number of 41.20 as his buy trigger. Here is the wider view chart:

widevew-aug3_2016

The night before, I was tweeting about an epic oil squeeze coming, which in hindsight is kinda funny because oil wasn’t going up anytime soon and there would not be an oil rally in anyone’s sights. But of course, my algorithm was telling me differently. I’m sure there were many traders thinking – who is this nutbar? So many of my tweets are reserved considering what I knew that I knew (the algorithm locked in just days prior) but didn’t want to sound too pretentious or whatever. I knew early on I had the math right… so that’s why I started tweeting when I knew oil would turn. So it was a balance… how I tweeted stuff that is… so people didn’t think I was nuts.

The following chart shows what the price of oil has done since:

wideview-detailed

Many have asked me how I would have known this and how the calls have hit so regularly since – how does that math work This is difficult to explain because it is a complex mix of indicators and data sets including price and trading history, historical volatility, traditional charting indicators, the nature of how the price action acts at various junctures, using traditional algorithmic sorting and matching calculations (Gale and Shapley 2012, Nobel Price winners), fundamental heuristics, a form of decision tree algorithms and mathematic disciplines such as Pi, Fibonacci and Euclid’s.

In other words, each commodity or equity has a natural state, and if you can extract the anomalies you are left with the algorithm – so it would take many hours to explain. I think my extensive code breaking experience with algorithms such as with Google’s has helped some also.

What has happened in recent months is that many of the more sophisticated algorithm builders have locked in the math and this is making it more predictable for people like myself to calculate, because as the larger firms lock in on it (target states), the more predictable the trading becomes. This is why (in my estimation) that most recently the Federal Reserve has signaled to the US government that they want the volume of trading in commodities reduced or limited by the hedge funds… simply because of this time in history with algorithmic trading. The Fed knows that certain groups have become very sophisticated and as such the Fed (their proxies, really) are finding themselves on the losing side of the trade. The Fed is packaging their assault on algorithmic commodity trading groups in a cloak of – “it is too risky”. They are simply packaging it in a more easily digestible way for the general public and lawmakers to execute.

On the same day I was tweeting alerts about oil companies that I knew would take flight soon. The following is an example of an alert that I had setup for $CWEI:

Here is what $CWEI has done since. It has gone from 35.84 to 88.31:

$CWEI Trading View Chart

As oil goes up in price, I get a little cheeky (nerd bragging):

At this point, I know the algorithm is working, but I don’t want people following my trades because I am using the algorithm as a sniping tool for my compound trading method and not longterm holds. Following my snipes could be a significant challenge if you aren’t right there with me (hence the trading room).

Here again I am warning traders not to follow because I know unless a person is looking over my shoulder following would not be easy.

Here, crude hits the 41.20 area on re-test and bounces – confirming the algorithm correct.

At this point, I was gently nudging friends/traders on my stream to back off their short positions without straight out telling them what to do. In hindsight, I should have been more direct… but that would’ve likely just caused strife.

Here I am reiterating to buy oil on every dip until election back early August because, of course, I have the algorithm hitting perfectly.

Once again politely trying to warn oil shorts.

Here, after the price of crude hits four alpha algo targets, (red circles – you have to zoom in to see the top of the candles hitting the targets in some instances, too) the important algorithm number of 41.20 is retested (blue arrow) and I am warning traders of the next most important test at 42.20. 42.20 hits and crude takes off to the next level of price. In addition to the tweets posted here, I tweeted numerous warnings about this time and price.

$WTI Crude Price Action

Below is an example of the type of trade I execute time and time again with the assistance of EPIC the Algo. When EPIC is signaling crude lift, I look to oil companies that are squeezing or reacting well to the price of oil. There are many examples on my Twitter feed (that I won’t all cite here – but anyone can review all trades on my Twitter feed anytime) where I easily exploit this advantage.

Here is a simple quick trade with $REN as a result of the algorithm.

longren-1337_rising

The below example, for context, was after oil had run for a number of days beyond the EPIC call and almost every trader was saying it was going to rest or turn right away (and to get out of long positions) at 43.75 resistance or at latest before 45.70 major resistance (which, in typical charting, did make sense)… but I knew what EPIC was signaling so I was politely signaling that the resistance points were of no concern. Then, I put out levels for traders to watch for and each one hit almost to the penny. Please note… when you are looking at these charts, the numbers on the right (in color boxes) represent various trigger points and aren’t relative to or reflect the trading price – you have to look at the white number in a black box – that is the point of price at that white horizontal line.

The first target hit 44.45, runs from 43.27, then blows through resistance 43.70 and hits 44.55.

crude_targethit

The second target then hits at 45.10.

crude_secondtargethit

After that, the third target hit 46.10, and then oil comes off a bit and “rests” for a time.

crude_thirdtargethit

Here I am warning traders not to trust a specific support and which support to trust (and obviously go long), and it hit the support to the penny and re-launched. After that, a rally restarted.

Blue arrow shows what happened next after call target of 44.45 support was tested.

crude_testsupport

Taking advantage of this effect, here’s a quick example of how the algorithm helps me get in and out of spikers with $GBR.

newconceptenergy_spike

So, at this point in the development of EPIC the Oil Algo, I started to tweet the alpha algo targets – with exact time and price – because I knew they were consistently being hit at this point. And sure enough… they continued to hit with outstanding regularity – 92% – 96% win rate on calls 24 hours to days out with a 96%+ win rate on intraday calls.

And yes, THERE IT IS! The alpha algo target hits at the exact time and price target zone.

crude_exactalphahit

Trader’s edge.

Pivots that traditional charting doesn’t see are the best part of the algorithm, in my opinion, because they give the trader a significant advantage (the trader’s edge) on an intraday basis which allows for predictable low risk compound gains. Below is an example where I knew that 48.30 represented a wall that, at the very least, would give crude a downdraft. I had been tweeting this resistance (with various other comments and observations) prior to this tweet and leading up to the downturn.

crude_pivottest

Here’s an example where crude oil $WTI was down-trending for some time and I began sending a series of tweets about the intra pivot I knew was there, but traditional charting didn’t.

crudeintrapivot

This is an intraday example of knowing pivots and the spike in crude oil I exploited to trade $UWTI.

uwtipivot

In the meantime, since EPIC’s introduction, the alpha algorithm targets are hitting regularly, as indicated by the red circles.

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The following set of images shows the algorithm’s targets being hit.

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Meanwhile, I am now at this point of 82 wins and 16 losses for a 83.7% win rate since my personal test launch of EPIC the Algo (albeit small gains on most wins – but that meets the test criteria for the compound trading discipline). If you review my feed, you will find every trade was posted in real-time at entry and exit for every trade.

The following is another example of a quick in-and-out trade within this discipline, when the algorithm indicators and chart indicators lined up for oil, and $REN was trading aggressively. This was an intraday trade with $REN.

The following image is another example of a call based on a trigger at the top of the algorithm’s “quadrant” and chart indicators intersecting with time and price – a combination for fireworks.

renquicktrade

Crude oil FX $USOIL $WTI hits the target call number 44.55 – squeezes and goes on a rally. It even blew through two strong trend-line resistance points with unusual ease (thick blue lines). When it hit the next upside trend-line (blue), it paused and then took off again, blowing through a previous resistance zone (thick purple) and stopped at the next previous resistance (thick purple). This was a very aggressive move, to say the least.

wtiaggressive

renpop


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By this time in EPIC’s development, I am starting to publish exact time and price targets more frequently (they have, at this point, hit many times consistently since early August).

The following tweet shows a chart where crude oil $USOIL $WTI hits my target to the exact penny and exact second/time of day. It has continued to do so since at a rate of 92%-96% of the time.


In the next image, the blue arrows show where a call was made and hit in crude oil $USOIL $WTI. The pink lines are for the quadrant work we have been doing to increase win rate intraday to over 96% (so the chart is very busy – sorry). Notice how the price action got aggressive as the time/price cycle got close to the time of the target and how the price of crude aggressively dropped to hit the alpha algo target perfect.

Keep in mind that our main objective is not forward calls (this is simply a bonus byproduct of the algo)… our main focus is developing algorithms that allow for a better trader’s edge intraday to reach the goal of low risk-to-reward quick trades at 1%-2% wins over and over again compounding at least 1% per day, taking a small account of 10k to 1.14 MM over 26 months (low risk with high probability wins, one small win at a time).

By this time, EPIC the Oil Algo has his own Twitter feed and continues to make calls that hit consistently.wtiquadhit


This following $USOIL $WTI call and market price action in crude was fun to watch because the price went completely the wrong direction and, at the last moment, magically dropped like a rock right into the target zone!


Target hit!


Here is an example of how EPIC the Algo can be used as an intraday trading edge (which is the best way to use EPIC’s signals). This was a late night session when I jumped in (after noticing some traders going short on oil) to let them know that EPIC was signaling a near-term rally. Please see the algorithm’s feed for all the posts. I will include some below here.

This is my first post politely serving notice that crude could rally (it was in a downtrend).


Below is the result of that call (FYI: there are likely 30 or more tweets on EPIC’s feed between the call and this post detailing every step of the rally).


And then I alerted the feed that the price of oil was about to turn down (there are a number of tweets on my feed that detail it) and the below tweet shows what crude did next.


Target hit!


Here is a recent example of a cluster of alpha algo targets that converged to one time and price target, and then split out from there, causing complications to say the least.

 

For more details, please refer to the Twitter feed of @EPICtheAlgo.