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IRby u/iyer_rahul·1dQuestion

Scaling into energy trades – how do you manage that early drawdown risk?

Hey everyone, still pretty green in commodities, especially on the energy side. I've been paper trading some $WTI and natural gas, trying to build positions by scaling in – say, a third of my total intended position at an initial level, then another third if it dips to a certain point, etc. The idea is to get a better average price and manage risk, but what I'm finding is that even with good confluence for the initial entry, that first third often goes into drawdown before the market potentially turns.

My question is, how do you seasoned traders mentally (and practically) handle that initial, often inevitable, negative P&L when scaling into a commodity like crude? Do you just accept it as part of the process, or do you have specific rules or indicators that make you hold off on that first entry until there's more confirmation, even if it means missing a bit of the move? Sometimes it feels like I'm just creating a bigger loss for myself before the trade even has a chance to play out properly. Any insights on how you approach this would be super helpful.

1 comments · 15 points

1 Comments

JAu/james69·1d

That early drawdown is a real kicker, especially in commodities. Have you considered using options to gain initial exposure or to cap your downside risk on those early tranches? It might change the dynamics of your average price but could offer a more defined risk profile.

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