War and Woe in European Gas

May in European Gas saw the price start around 46 euro and finish about 46 euro.  In between the trend was mostly bullish with a high briefly breaching the magical 50 euro mark and a low around 43.5.

Despite various tweets there was never any nearly moments for the return of the Qatari gas and as the month closed and June started the ceasefire started to look more and more fragile.

The major question on everyone’s lips is why we are not a lot higher and the debate has been done to death with no real hard and fast conclusion that I can see.  The truth is probably a complicated mix of many moving parts, which for the benefit of those that have spent the last 3 months in an underground bunker, I will list below:

·       Asian countries using storage

·       China not buying

·       New LNG from USA and Canada

·       Demand destruction from poorer nations

·       Algo’s and AI trading

·       Trump headlines

·       Shape of the curve

·       Everyone being long paper

·       Paper price went up before physical short materialised

·       Physical short in wrong place

·       VAR restrictions

Whichever angle you are looking at things from, the one thing that stands out is that the market is one giant mess and it is virtually impossible to trade flat price.  You are a crazy person to short it, but one Trump tweet and your dead from the long side as well.  Options are understandably expensive and so options spreads are by far the best idea if you want/need to be involved.   

My clients that have done the best are the ones that have had very light risk, day traded or focussed on improving other areas.  Various traders have said to me they are working on AI projects, their own skills and knowledge and their process for when things return back to a semblance of normality. 

I would hazard a guess that these are also the traders that are suffering the least from burnout and stress and have probably got the best looking P and L’s as well.

As for my own trading experience of the war, Ill be honest and say I made a big mistake and nobbed it.  After a great start to the year, I called the start of it well and felt very much like I was in the zone and that maybe trading wars was easier than I remember!!  The collapse from the highs in oil bought me back down to earth with a bump and that was my cue to park myself on the sidelines and focus on other things.

Unfortunately on the day of the ceasefire I made a very rooky mistake and it has proved rather costly. 

I will always remember that sunny April day, thankfully not because of my P and L loss or the ceasefire but because it was also my wedding day (I know, Mrs Smith is a very lucky lady) and it was a very happy day indeed. 

My plan had always been to buy gold once Iran was all over, but that morning as I glanced at my phone while I sipped my bubbles I was rushing, I wasn’t following my process and my all-important gut feel was telling me not to do it.  Unfortunately as a saw gold soaring, FOMO got the better of me and I quickly bought an August call in size at what was pretty near the recent top of the market.

Thankfully I didn’t spend my wedding day glued to IG but by the next day my worst fears were compounded and things didn’t get much better after that.  I had a few chances to get out relatively lightly, but I told myself to hold as it was a long term position and surely this would now be all over soon.  It was all hope over expectation and we all know you should never hold losing positions on hope alone. 

The more news I read and experts I listened to, that feeling of dread only intensified and after a couple of rather horrendous attempts to trade around the position on yet more bad news for gold, I pulled the rip chord and took my medicine.

I firmly believe we learn a lot more from our mistakes than from our victories and since I pulled the plug I have followed my own advice and left things largely alone. 

I did sell a low ball WTI put spread on one of frantic sell offs and that has been a low risk, low stress trade that has drip fed P and L back on a most days.  Crucially that trade felt right from the minute I put it on, even though I didn’t catch the lows and it was quickly in negative territory and stayed there for a few hours.

Aside from that I have continued to improve my own AI trade tracking system, have built a really cool AI dashboard for my coaching customers (it will be cool when it works properly) and have continued to upskill myself as a coach and a trader.  I am not burned out and as I write this article I am feeling extremely confident in my ability as both.

Right now is about using your time wisely, preservation and survival and not a time for heroes.