Joe Ross' Spread Scan Newsletter

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Spread Scan Issue: January 16, 2008 - Volume 177

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Otherwise, welcome to this week’s issue of the Joe Ross Spread Trading Newsletter.

The Spread Scan weekly newsletter is designed to assist you in becoming a better more complete trader by showing you within the context of the markets, how to trade spreads.

In this newsletter you will see applications of spreading in the futures and commodity markets. Spreads are applicable to all futures markets including currencies, commodities, financial instruments, and stock indexes. It is even possible to trade spreads in the all-electronic intraday market using day trading techniques.

Spreads are based on seasonality, correlation, backwardation, chart patterns and simple observation. Spreads follow the Law of Charts™ and can be implemented using the Traders Trick™ entry.

In each issue of Spread Scan, you will find an upcoming spread trade for your consideration in the following week. You will also find a review of an existing or closed spread so you can see and learn how spread trades are managed.

Spreads offer you the most efficient use of your margin account of any other way to trade. Many traders find they like them so much that spreading becomes their primary way of trading.

Each week we present spread trading examples and opportunities in order to help you become a more professional spread trader, and we provide you with helpful content of interest to traders:

Andy Jordan's Spread Scan Example:

This week we look at 1000*ADH8 – 1250 SFH8 > Long March '08 Australian $ and short March '08 Swiss Franc

Today we consider an inter market spread in the currencies: long March '08 Australian $ and short March '08 Swiss Franc (1000*ADH8 – 1250 SFH8). This spread has been in a long term up trend (weekly chart) since 2003, but is now trading in a range between -$27,000 and -$17,000. The seasonal time window is very short, with an optimized entry on 01/14 and an optimized exit on 02/21. This spread needs high risk because of high volatility.

Traders may want to enter the spread at a spread value of $24,450. Initial margin is $4,320 (no reduced margin). Suggested risk is $2,700. Initial projected objective is $2,700, then a move to -$17,500 or higher. Basis is seasonal (app. 1/14 – 2/21) and a 1-2-3 low. Because of the different values of each unit move of the Australian $ and the Swiss Franc, we have to multiply the buy side by 1,000 and the sell side by 1,250 to get the right equity chart. The spread is 1:1.

Previous Trades:

Andy Jordan's Trading Bites

Student's Question: "Andy, what does “optimized” entry or exit mean? Is it part of spread trading only, or is it also used in outright futures trading?"

Andy: Optimized entry or exit is part of seasonal patterns. For example: the spread X–Y shows a strong seasonal up move in July with an optimized entry date on July 3 and an optimized exit date on July 28. This means “usually” the spread moves up between July 3 and July 28, but this is just based on statistical data of the past and does not give any guarantee about the future. A lot of statistical analysis is involved in seasonal trading. Think of a bell curve used in statistical analysis of distribution. The optimized date point lies at the top of such a curve, and is probably not the best in any one year, but best if used overall. Such a statistical sample usually uses 15 years to calculate seasonality, but, as you can imagine, the optimized entry or exit date cannot fit each single year. That’s why we cannot look only at seasonal patterns. We also have to look at the chart, or use any other tool to optimize our own entry. Seasonality gives you an edge, especially in spread trading. Combined with good money management, you should come out a winner.

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A beginning Spread Trader, just starting out in learning to trade spreads.

An experienced Spread Trader who wants to take advantage of all the features and benefits that Traders Notebook™ offers daily, such as directing you to spreads you might want to trade.

A Day Trader who wants to trade Stock Indexes and Currencies using Futures Spreads.


You have subscribed to Joe Ross' Weekly Spread Scan Newsletter. If you have problems reading this newsletter, please follow this link: Spread Scan Issue: January 16, 2008 - Volume 177
This email was sent to you by Trading Educators. To ensure delivery to your inbox (rather than to bulk or junk folders) please add info@spread-trading.com to your address book immediately. To unsubscribe, scroll past the end of this newsletter and click the "unsubscribe" link. Otherwise, welcome to this week’s issue of the Joe Ross Spread Trading Newsletter. The Spread Scan weekly newsletter is designed to assist you in becoming a better more complete trader by showing you within the context of the markets, how to trade spreads. In this newsletter you will see applications of spreading in the futures and commodity markets. Spreads are applicable to all futures markets including currencies, commodities, financial instruments, and stock indexes. It is even possible to trade spreads in the all-electronic intraday market using day trading techniques. Spreads are based on seasonality, correlation, backwardation, chart patterns and simple observation. Spreads follow the Law of Charts™ and can be implemented using the Traders Trick™ entry. In each issue of Spread Scan, you will find an upcoming spread trade for your consideration in the following week. You will also find a review of an existing or closed spread so you can see and learn how spread trades are managed. Spreads offer you the most efficient use of your margin account of any other way to trade. Many traders find they like them so much that spreading becomes their primary way of trading. Each week we present spread trading examples and opportunities in order to help you become a more professional spread trader, and we provide you with helpful content of interest to traders: Andy's Spread Trading Example Previous Trades Andy Jordan's Trading Bites More Spread & Position Trade Opportunities - too good to pass up Next Live Chats with Joe Ross - Every Wednesday in 2008 Contact Us Be sure you receive all your issues of Spread Scan so that you can continue to enjoy learning through the best free educational trading information available, and so that we can keep you informed about additional educational services and products to help you grow as a successful and profitable spread trader.
Andy Jordan's Spread Scan Example: This week we look at *1000ADH8 – 1250 SFH8** > Long March '08 Australian $ and short March '08 Swiss Franc Today we consider an inter market spread in the currencies: long March '08 Australian $ and short March '08 Swiss Franc (1000*ADH8 – 1250 SFH8). This spread has been in a long term up trend (weekly chart) since 2003, but is now trading in a range between -$27,000 and -$17,000. The seasonal time window is very short, with an optimized entry on 01/14 and an optimized exit on 02/21. This spread needs high risk because of high volatility. Traders may want to enter the spread at a spread value of $24,450. Initial margin is $4,320 (no reduced margin). Suggested risk is $2,700. Initial projected objective is $2,700, then a move to -$17,500 or higher. Basis is seasonal (app. 1/14 – 2/21) and a 1-2-3 low. Because of the different values of each unit move of the Australian $ and the Swiss Franc, we have to multiply the buy side by 1,000 and the sell side by 1,250 to get the right equity chart. The spread is 1:1. back to top
Previous Trades: On January 7 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a calendar wheat (CBOT) spread WN8 – WH8 (elec.) MOC tomorrow 01/08. Initial margin is $2,295. Suggested risk is $1,900. Initial projected objective is $1,900, then higher. Basis is seasonal (app. 1/9 – 2/8) and a RH. Comment: This calendar spread needs high risk because of high volatility." Here's how we suggested managing this trade: 01/08 In? Suggested stop at -133. 01/11 Suggest moving stop to -126. Limit up – be careful if you want to exit/enter the spread. 01/14 Suggest moving stop to -111. 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
Andy Jordan's Trading Bites Student's Question: "Andy, what does “optimized” entry or exit mean? Is it part of spread trading only, or is it also used in outright futures trading?" Andy: Optimized entry or exit is part of seasonal patterns. For example: the spread X–Y shows a strong seasonal up move in July with an optimized entry date on July 3 and an optimized exit date on July 28. This means “usually” the spread moves up between July 3 and July 28, but this is just based on statistical data of the past and does not give any guarantee about the future. A lot of statistical analysis is involved in seasonal trading. Think of a bell curve used in statistical analysis of distribution. The optimized date point lies at the top of such a curve, and is probably not the best in any one year, but best if used overall. Such a statistical sample usually uses 15 years to calculate seasonality, but, as you can imagine, the optimized entry or exit date cannot fit each single year. That’s why we cannot look only at seasonal patterns. We also have to look at the chart, or use any other tool to optimize our own entry. Seasonality gives you an edge, especially in spread trading. Combined with good money management, you should come out a winner. back to top
SIGN UP for our Daily Spread & Position Trading Advisory Newsletter: Traders Notebook™ Good Trade Management Trade Consistency More Spread & Position Trade Opportunities - too good to pass up Traders Notebook™ is the premier spread and position trading newsletter, the only one of its kind, available to you as our loyal Spread Scan Subscriber. Choose your subscription term and try it out! *Traders Notebook™ is definitely for you if you are:* A Position Trader A Long-term Trader. A beginning Spread Trader, just starting out in learning to trade spreads. An experienced Spread Trader who wants to take advantage of all the features and benefits that Traders Notebook™ offers daily, such as directing you to spreads you might want to trade. A Day Trader who wants to trade Stock Indexes and Currencies using Futures Spreads. Traders Notebook™ lets you in on high probability futures position trades. These trades are hand-picked by Andy Jordan and Joe Ross. They are very carefully chosen for optimum results. Traders Notebook™ also directs you to all the spreads you might want to trade. Subscribers have daily access to online help and advice. Spreads are chosen by Andy Jordan, our Trading Educators' professional spread trader. We believe Andy is one of the best spread traders in the world! Follow this link for more details and sign up for our PREMIER Spread & Position Trading Advisory Newsletter to increase YOUR success and make YOUR trading a more rewarding trading experience. Try It and You'll See!
View last week's Spread Scan # 176 - January 09, 2008
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Next Chat: Wednesday, January 16, 2008. We hope you will join us! Here is where you login to Joe's Wednesday Chat You can also view our saved weekly Chat Logs in case you missed any Chats but want to be up-to-date
Next Chat: Wednesday, January 16, 2008. We hope you will join us! Here is where you login to Joe's Euro Chat You can also view our saved weekly Chat Logs in case you missed any Chats but want to be up-to-date.
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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!

Good Trade Management

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More Spread & Position Trade Opportunities - too good to pass up