Brent Crude Momentum Strategy

The 4-hour timeframe offers the best balance - enough signals for active trading but filtered enough to avoid noise. Daily timeframe works well for swing trades. Avoid timeframes below 1-hour due to oil's inherent volatility and spread costs.

Minimum S$5,000-10,000 recommended for CFD trading to allow proper position sizing. With 2% risk per trade and typical stops of $2-3/barrel, this allows meaningful positions while surviving drawdowns. Futures require more capital due to margin requirements.

London session (3 PM - 11 PM SGT) and US session (9 PM - 4 AM SGT) offer best liquidity. The overlap (9 PM - 11 PM SGT) is particularly active. Avoid Asian session for new entries due to lower volume, though positions can be held.

Brent is generally preferred for international traders including Singapore. It has higher global relevance, tighter correlation with actual physical prices most traders would encounter, and is available on most MAS-licensed broker platforms. WTI is more US-focused.

EIA releases Wednesday at 10:30 PM SGT. Avoid new entries 30 minutes before through 30 minutes after. Existing positions can be held but consider tightening stops. The report often causes 1-2% moves; direction depends on actual vs expected inventory change.

Compare price highs/lows with corresponding RSI or MACD highs/lows. Bearish divergence: price makes higher high, RSI makes lower high. Bullish divergence: price makes lower low, RSI makes higher low. Use divergence to tighten stops or reduce size, not necessarily to counter-trade immediately.

OPEC decisions cause major volatility. Close or hedge positions before key meetings. After announcement, wait 2-4 hours for dust to settle before entering new momentum trades. The post-OPEC trend often persists for days/weeks - patience is rewarded.

Use fundamentals for directional bias, momentum for timing. Bullish fundamentals (inventory draws, OPEC cuts, strong demand) + bullish momentum = high conviction long. Momentum signal against strong fundamental headwinds should be traded with reduced size or skipped.

Generally inverse correlation - strong USD pressures Brent (oil priced in USD becomes more expensive for foreign buyers). However, correlation varies. Use DXY Supertrend or momentum as confirmation: Brent long signal + USD weakness = higher probability.

Oil can gap on overnight news (Middle East events, surprise data). If gap moves through your stop, exit at open - don't hope for recovery. Position sizing should account for gap risk. Reduce weekend positions or use guaranteed stops if available.

Use COT as position sizing modifier, not signal generator. Managed Money < 50th percentile net long + bullish momentum = full size (room to run). Managed Money > 80th percentile + bullish momentum = reduce size (crowded). Extreme positioning (>90th percentile) suggests tightening stops as reversal risk elevated.

Combine ADX (trend strength), ATR percentile (volatility), and OVX (implied volatility). Optimal regime: ADX > 25, ATR 30-70th percentile, OVX < 35. Pause or reduce: ADX < 20 (ranging), ATR > 90th percentile (extreme volatility), or OVX > 50 (crisis). Hidden Markov Models provide more sophisticated detection.

Use walk-forward validation (optimize on 18 months, test on 6 months, roll forward). Prefer parameters that perform consistently across regimes over those that maximize total return. Limit optimized parameters to 3-4 maximum. Cross-validate across different time periods and ensure parameter stability.

Implement risk parity with correlation adjustment. Treat Brent + WTI as single cluster (max 3% combined). Natural Gas uncorrelated - can allocate additional 2%. Total energy: 5-6% max. When cluster members all signal same direction, reduce each to maintain cluster limit. Rebalance allocation weekly based on rolling correlations.

Monitor regime indicators continuously. If regime degrades (ADX drops below 20, OVX spikes above 40) while in position: (1) Tighten stop to breakeven or 1 ATR trail, (2) Reduce remaining exposure by 50%, (3) Lower profit target to nearest support/resistance. Don't add to position during regime deterioration.