Initial Details, Outcomes and Learnings of my First Trades

 (All completed on a practice CFD trading account, better price spreads than spread betting and pricing more true reflection of real markets) 

My trades for Brent crude were two mini $5 futures contracts dated June, controlling a notional amount of $72,800.

I used the mini ($5) futures market as it requires much less margin and therefore less risk, which is better to test my first trades out with - although the $100k starting with in paper money hopefully is ample amounts to take bigger trades with in the future! 

The first contract had a take-profit limit at the $7,200 price mark (for 1,000 barrels), in case my predicted upward movement from Brent’s bottoming at $6,815 was a temporary correction and not a true rally. The profit taken from this was $373.

The movement has continued past the $7,200 price mark.

The second contract currently has a take-profit at the $7,400 price mark, which is looking likely to reach. The current profit for the second contract is $577, which would grow to $1,216 if it hits the take-profit limit. At that point I would need to re-assess my original theory behind going long, and see if the logic is first of all true (this could still just be a very well timed correction from price bottoming out, or both) and also whether it is sustainable to add futures contracts at these higher prices.

Fortunately, it appears these trades have been well timed, and it has been wise of me to place conservative take-profit limits to secure some profit from my first ever trades. 

HOWEVER, my logic for US (WTI) crude seems to be wrong. I bought one May short mini (5$) futures contract to hedge my Brent crude bets (but also I thought their price movements would not be as related to each other). It appears I am wrong, and that US crude price movement was almost exactly the same as Brent crude, emulating a healthy uptick from bottoming out…. 

Upon further research, I have realised that Brent and WTI move together most of the time as their benchmark status means they are effected by similiar/same global oil fundamentals in reality. 

I also realised that my idea of a hedge was actually a DIRECTIONAL SPREAD - meaning going long Brent and short WTI exposes me to the Brent-WTI spread. In reality, this is a relative value trade, not a hedge, which means I am hopefully profiting off the price difference of Brent typically trading marginally higher than WTI. 

Although it could be considered a hedge (attempted) if I genuinely believed - which I did - WTI would underperform Brent by more than just its typical price difference…

I ended up closing this trade at a -$937 loss well before my overly high stop-loss (will need to be more precise with these and with better justifications, not just estimations).

Overall, I will need to consider how I better hedge these trades in the future to give my profit more breathing room, ex: shorting correlated Brent contract at smaller sizes, buy Brent put options.