Why Traders Call Natural Gas the “Widow Maker”
Natural gas (NG) is notorious in trading circles. Traders call it the “widow maker,” not because of superstition, but because of how often it destroys well-reasoned strategies. Indicators that work in equities, bonds, or even crude oil often fall apart in the chaotic world of gas.
The Historical Context
The “widow maker” moniker didn’t emerge overnight. It’s been earned through decades of devastating market moves that have wiped out hedge funds, commodity trading advisors, and retail traders alike. The term originated in the energy trading pits of the 1990s, where seasoned traders watched colleagues lose everything on what seemed like “sure thing” natural gas trades.
Unlike crude oil, which tends to move on geopolitical events and global supply-demand dynamics that unfold over weeks or months, natural gas can experience supply-demand imbalances that manifest in hours. A surprise cold front in the Northeast, an unexpected pipeline outage, or even a single weather model revision can trigger moves that would take other commodities months to achieve.
When Indicators Fail
Over the past few months, we’ve tested dozens of technical setups:
CCI Crossovers: When NG’s CCI crossed +100, BOIL sometimes had a 60–70% chance of a –5% decline within 2 weeks — but in the other 30–40% of cases it surged higher, often by 20% or more.
RSI Levels: Oversold or overbought readings failed to give reliable direction. What looked like exhaustion often preceded another leg higher or lower.
Moving Average Crossovers: Death crosses (5/10, 10/20, 20/50, 50/200) frequently gave whipsaws, triggering traders out of good positions or leading them straight into reversals.
Rollover Dates: On average, BOIL fell after roll dates (–2.8% two weeks later), but single outcomes ranged from +60% rallies to –50% crashes. Averages were swamped by extremes.
The Psychology Behind Failed Strategies
What makes these indicator failures particularly devastating is that they often work just enough to give traders false confidence. A momentum oscillator might correctly predict five consecutive moves, leading a trader to increase position size — only to get crushed on the sixth trade when the market behaves completely differently.
This is the same psychological mechanism that makes gambling addictive. Traders become convinced they’ve found the “holy grail” indicator, right before natural gas humbles them with a reality check.
The problem compounds when considering that most technical analysis was developed for equity markets, where human psychology drives much of the price action. Natural gas, however, is driven by physical realities — actual molecules of gas that need to be stored, transported, and consumed according to the laws of physics and thermodynamics, not the laws of market psychology.
Numbers That Mean Nothing
A few examples illustrate the futility:
Around September rolls, BOIL’s average move one week later was flat. But individual cases ranged from +40% rallies to –23% crashes.
Across all roll dates, BOIL dropped 5% within two weeks 69% of the time, but also rose 5% within two weeks 51% of the time. Depending on the slice, you could prove either the bull or bear case.
The Wild Moves
Beyond indicators, the raw volatility tells the story. Over BOIL’s history:
Daily swings: as much as +38.9% in a single day, and down nearly –33% in one session.
Weekly moves: rallies topping +70%, crashes beyond –60%.
Monthly swings: gains exceeding +120%, drawdowns over –80%.
Annual extremes: years with 300%+ upside bursts, others with losses wiping out nearly all value.
This volatility is why leveraged ETFs like BOIL decay over time and why traders trying to “predict” moves with indicators often get chewed up.
Case Studies in Destruction
The 2021-2022 period provides a masterclass in natural gas volatility. In late 2021, European gas prices went parabolic due to geopolitical tensions, creating sympathy rallies in U.S. markets that traditional analysis couldn’t explain. BOIL went from around $20 to over $80 in a matter of months.
Then came the crash. By mid-2022, warm weather, increased LNG exports, and production growth sent prices plummeting. Traders who bought the “dip” at $60 watched their positions evaporate as BOIL fell below $15. The speed and magnitude of these moves made risk management nearly impossible — stop losses became meaningless when gaps exceeded 20%.
More recently, the February 2021 Texas freeze provides another cautionary tale. Spot natural gas prices at certain delivery points briefly touched $1,000 per MMBtu — roughly 40 times the normal price. While futures markets didn’t reach these extremes, the psychological impact on traders was profound. How do you position size for a market that can move 4,000% in a few days?
Why NG Defies Prediction
Natural gas is uniquely volatile because:
Weather-driven demand — cold snaps, heat waves, and hurricanes can flip fundamentals overnight.
Storage and supply shocks — weekly EIA inventory releases regularly spark double-digit moves.
Seasonality and contract structure — the futures curve amplifies swings through contango/backwardation shifts.
Leverage — products like BOIL magnify every twist, turning volatility into catastrophic drawdowns or windfalls.
Risk Management in an Unmanageable Market
Traditional risk management techniques often fail in natural gas markets. Position sizing based on average volatility can be devastatingly inadequate when dealing with a market that regularly experiences 10-standard-deviation moves. Stop losses become meaningless when gaps exceed the stop level by multiples.
Some professional traders have adapted by using options strategies that limit downside risk, but these approaches require sophisticated understanding of volatility pricing and often sacrifice profit potential for risk control. For retail traders using leveraged ETFs like BOIL, such strategies are often unavailable or prohibitively expensive.
Conclusion: The Widow Maker
Our data dives show how treacherous this market is. Whether it’s CCI, RSI, moving averages, or roll dates, nothing provides a durable edge. Averages point one way, but the distribution of outcomes overwhelms them.
That’s why NG earned its nickname: it punishes anyone who thinks they’ve “figured it out.” The only constant in natural gas trading is uncertainty magnified by leverage. For most traders, that makes it less an opportunity than a widow maker.
The Lesson for Modern Traders
Perhaps the most important lesson from natural gas markets is humility.
The physical realities of natural gas — weather, storage, seasonality, and infrastructure — create a market environment where even perfect information doesn’t guarantee profitable trades. When imperfect information, leverage, and human psychology are added to this mix, the result is a market that has earned its fearsome reputation through decades of destroying trading accounts.