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Spread
Scan Issue: August 15, 2007 - Volume 157
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Today we consider an inter-market equity spread: long September 07 Feeder Cattle and short February 08 Live Cattle (500*FCU7 – 400*LCG8). After trending up nicely in June and July, the spread has been pulling back for the last 3 weeks. Now, just in time with the seasonal time window from approximately 08/3 - 09/17, we get a possible 1-2-3 low for a possible entry. Because of the different values of each unit move of Feeder Cattle and Live Cattle, we have to multiply the buy side by 500 and the sell side by 400 to get the right equity chart. The spread is 1:1.
Traders may want to enter the spread at a value of $18,270. Margin for the spread is $2,633 (no reduced margin). Suggested risk is $1,000. Initial projected objective is $1,000, then a move higher. Basis is seasonal (app. 8/3 – 9/17) and a 1-2-3 low. Comment: This is a very aggressive entry. More conservative traders might want to enter on the next RH.
On August 06 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider buying September e-miNY Natural Gas at 6.27 stop market (all sessions). Initial margin is $2,194. Suggested stop at 5.9 (app. $930). Initial projected objective is $1,000, then higher. Basis is a TTE in front of a 1-2-3 low."
Here's how we suggested managing this trade:
08/07 In at 6.30. Suggested stop at 5.90.
08/08 Trade doesn’t look very promising so far. Suggest moving stop closer to 6.10.
08/09 Did you take first profits today (see mail from today 9:45 AM CT)? Suggest moving stop to break even.
08/10 Suggest moving stop to 6.40.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
Can I really make it as a trader?
by Joe Ross
You alone determine whether you will succeed or fail at trading. You alone are in control; take responsibility for your performance and your life. There are always tremendous opportunities in the markets. It is not what happens, it is what you do with what happens that makes the difference between profit and loss.
However, you cannot marry a market or a single trading style. You have to look. Look at a variety of time frames and a variety of markets until you find the one for you, the one that fits your comfort level and trading style.
Most traders move from trading system to trading system or trading method to trading method over time, until they find one that suits them, one that is comfortable to run, and that tests well over time (back-tested, then real time testing.) But don’t expect a trading system to work forever. Markets change too much for that to be practical.
On the other hand, some traders never stop looking for the perfect system. That, too, is a problem.
There are many systems or methods that can generate nice profits over time. To settle on a trading system that’s right for you:
First, you have to believe in the process by which the system generates trades. For instance, who was Fibonnaci? How did he arrive at his methodology? Does it make SENSE to you?
Maybe you’re a visual sort of person and you are drawn to Candlestick charting. Take the time to understand why the patterns mean “reversal” and not just accept the “picture”. Go deeper.
Second, whatever method or system you decide use, back-test it. In today’s modern world of software there’s no excuse not to run all the back data you can through your system to see what the results would have been.
THINK about the system you are choosing and why it’s right for you. THINK about the results you get from the back-testing and real-time testing of your system.BE A MACHINE (DON’T THINK) when you are trading your system or method!
Third, work on your discipline. Unless you can control yourself, you can never control your trading. In order to control yourself and your emotions, you have to believe totally in your trading system or method, and above all, in yourself.
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2007 by Trading Educators, Inc
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Disclaimer:
The Commodity Futures Trading Commission has asked us to advise you that trading spreads or outright futures 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!