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Spread
Scan Issue: June 13, 2007 - Volume 148
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Today we consider an calendar spread: long December 08 Corn and short September 07 Corn (CZ8 – CU7). After moving up nicely in March, the spread went into a trading range. A break out of the spread to the up side of the range could be a sign that the spread has started its seasonal up move (app. 6/1 – 8/1). Another idea could be to enter the spread around 8 with a close stop, to see if the spread will turn around at the lower side of the range.
Traders may want to enter the spread at a value of 24. Initial margin for the spread is $608 (reduced margin). Suggested risk is $500. Initial projected objective is $500, then a move to 50 or higher.
On June 03 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a calendar RBOB Gasoline spread RBU7 – RBN7 at a spread value of – 10.79. Please ask your broker about the margin. Suggested risk is $1,500. Initial projected objective is $1,500, then a move to -2 or higher. Basis is seasonal (app. 6/4 – 6/21) and a 1-2-3 low. Comment: I would recommend the spread only to experienced traders with deep pockets."
Here's how we suggested managing this trade:
06/04 Suggest entering MOC tomorrow, if not already in the trade.
06/08 Spread hit first suggested target. Suggest moving stop to break even.For more information about our daily newsletter, visit our Spread Website to find out more about Traders Notebook
Questions or Comments? Please email us: support@spread-trading.com
Important Trading Tips from Joe Ross (continued from last week)
TRACKING YOUR TRADES
21. Size kills. Change your unit of trading only under a plan of attained goals. Also, have a plan for reducing size when your trading is cold or market volume is down.
22. Confidence kills. Remember, you really don't know anything. Respect the market every second of every day. Expect the unexpected. Always know your position and exit your trade immediately whenever you feel uneasy.
23. Measure yourself by profitable "days in a row," not by individual trades.
24. The best way to break a streak of "losing days in a row" is to not trade for a day.
25. Don't stop trading when you're on a winning streak. "When you're hot, you're hot."
26. Three strikes and you're out! Don't turn three losing trades in a row into six in a row. When you’re off, turn off the screen, do something else. "When you're not, you're not."
27. Scalpers reduce the number of variables affecting market risk by being in a position for only seconds. Day traders reduce market risk by being in trades for a matter of minutes.
28. If you convert a scalp or day trade into a position trade, by definition you did not consider the risks of the trade.
29. Don't ever fret about a missed opportunity. There is always another one just around the corner. Besides, several just happened that you didn't even know about.
MARKET OPINIONS
30. If you look for market secrets, you will find only things that no one cares about. Use the conventional tools.
31. Never ask for someone else's opinion - they probably did not do as much homework as you.
32. When the market is going up, say "the market is going up." When the market is going down, say "the market is going down." Say it without qualifications, no "buts" attached. This is a reality check. You'll be amazed at how hard it is to say what is literally going on in front of you when your mind is full of preconceived opinions.
33. THE DAILY MARKET COMMENTARY: I've never had an opinion I didn't like. However, successful day trading requires flexibility. Do your homework not to develop a market opinion, but rather to understand the potential for both sides of the market. This will allow you to make your trades based on what the market is doing at the time of the trade.
34. Here is a quote to remember: "When you wake up, your instincts are wrong."
SOME FINAL THOUGHTS
35. When you make a mistake of discipline, whine like a fool to anyone who will listen. Errors in discipline are mistakes you will keep on making for many years. Wearing ashes and sack cloth may help extend the time before you do it again.
36. If you squirmed and moaned while you read this list, then you share two obvious characteristics with many of us:
A. You have traded long enough to recognize that you (not the market) make mistakes, and you try to overcome them.
B. Now this is ugly: you have become part of the market and you can never leave. No matter where life takes you, you will always check the market and always want to continue being a part of it. It's like that first true love; it will always be there no matter what the distance, no matter whether they are alive or dead.
Book Tip: Joe Ross' Trading Spreads and Seasonals
The best and smartest traders find a way of trading the markets that enables them to get in and get out with the greatest probability of profits - time after time after time. They find a method of trading that most other traders have never attempted. The idea is to find not only high probability trades that give traders the best use of their margin accounts, but also to find a way to avoid being a victim of stop running, that nasty enemy of most traders. During my trading career, and especially since the late 1980s when I started writing and teaching people how to trade, I studied the markets from the point of view of how traders could make money steadily, getting the most efficient use of their money, while at the same time taking advantage of high percentage trades. Some of the best traders I know are doing this, but you are not going to see them interviewed on any TV money show. They are knowledgeable, successful, and respected among trading professionals who are "in the know."
The way of trading I'm talking about has been successful for me throughout my entire trading career. What I'm talking about is learning to trade spreads, and I believe almost anyone, with the right training, has the potential to quickly and easily make money trading them. Please follow this link and let me introduce you to a fascinating and lucrative world most traders will never realize exists....
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Disclaimer:
The Commodity Futures Trading Commission has asked us to advise you that trading spreads is complex and carries a high degree of risk. While there is opportunity for incredible wealth building, there is also the risk of losing even more than you invested. Of course, that's not unlike most other businesses. But informed traders are the best traders!