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Spread Scan Issue: February 06, 2008 - Volume 180
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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 to help you become a more professional spread trader, and we provide you with helpful content of interest to traders:
- Andy Jordan's Trading Bites
- The Law of Charts Online Video with Joe Ross
- Next Live Chats for Traders with Joe Ross
- 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.
Today we consider an intra-market calendar spread: long March '08 Coffee and short May '08 Coffee (KCH8 – KCK8). This spread has been trading sideways since November ’07. A small (only 10 days) seasonal time window could move this spread higher between app. 02/11 and 02/21. Risk seems to be moderate compared with the profit potential. I personally would enter/exit the spread using a limit order, otherwise slippage could eat up your possible profits.
Traders may want to enter the spread at a spread value at -2.6 limit. Initial margin is $350 (reduced margin). Suggested risk is $100. Initial projected objective is $100, then higher. Basis is seasonal (app. 2/11 – 2/21). Comment: This is a very low risk spread. I would use a limit order to enter/exit the spreads. First Notice day for March Coffee is 2/21.
On January 28 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a metal spread 50*SIH8 – 100*GCG8 (elec.) at a spread value of -$8,600. Initial margin is $10,125 (no reduced margin). Suggested risk is $1,600. Initial projected objective is $1,600, then a move to -$5,000 or higher. Basis is seasonal (app. 1/22 – 3/18). Comment: It is possible you get a spread credit but you have to check with your broker. FN for SIH8 is 02/29 and for GCG8 01/31."
Here's how we suggested managing this trade:
01/29 Suggest entering MOC tomorrow, if not already in the trade. We have to roll from Feb. Gold into April Gold not later then 01/31.
01/30 In? Suggested stop at -$9,870.
01/31 Suggest moving stop to -$9,460. I personally would cash in some profits if possible today.
02/01 Spread hit first suggested target. Suggest moving stop to -$8,800.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
Student's Question: "Andy, what do you think have been the most important changes in the markets in the last few years?"
Andy: As you might have noticed, you can now trade almost all products in the electronic markets. You can trade the Grains at the ECBOT, the Softs at the ICE, and so on. BUT you should always double check to make sure you are trading the right product at the right market. The volume can be very different between the markets, and it is not always easy to keep an overview. If you are not sure what to trade, pit or electronic, check the volume and talk to your broker.
But that’s not all. All the ECBOT products will move to the Globex, the Emini Russell 2000 will move completely to the ICE by September ‘08, and they will reduce the tick size for the T-Bonds. As you can see, a lot has happened and is still happening. Just make sure you know what you trade; check the product description at the exchange. Make sure you have enough volume in the contract month you want to trade.
The Law of Charts Online Video - START WATCHING TODAY!It's time to reap greater profits by implementing
THE LAW OF CHARTS
in your tradingProfit-making concept — keep your trading simple by using the LAW
The truth is simple: the charts in the markets follow a law.
Professional Trader Joe Ross calls that lawThe Law of Charts™
This Online Video Seminar, presented by Joe Ross himself, gives you a brief presentation of the Law of Charts formations, followed by a very detailed explanation of how to implement the Law of Charts for making profits. We know you and your trading will benefit greatly from Joe's lessons. The online video seminar also reveals one of the most essential factors in trading called “Market Dynamics.” Market Dynamics answers the questions:
- Where are prices most likely to move next?
- Why do prices move to where they move?
- How far are prices likely to move when they do move?
- PLUS: The online video seminar reveals some of the best ways to follow market momentum and thrust. You will see the source of market momentum, the cause of market momentum, and how to take advantage of it to put profits in your pocket.
- The online video seminar takes you through some very interesting uses of indicators that will assist you in filtering Law of Charts formations. Joe Ross does not normally use indicators the way they were created to be used, but he does use indicators in unconventional ways to determine when to use Law of Charts formations, and to filter out "the best of the best" prior to entry.
- In addition, the online video seminar gives you the rationale behind the Traders Trick Entry™. You will learn what causes Ross hooks™, and how to trade them. You will see how and when to use the Law of Charts when prices are in consolidation.
- There is really much, much more, because Joe elaborates on the slides, giving you gems of information with each slide that you will not see in the free pdf Law of Charts material on our website, nor in any of his books.
Joe's trading students have told him that once they understood the markets, all they ever needed to trade them profitably is an understanding of the Law of Charts™ along with the dynamics of the market. You are going to receive both of these and more, learning to trade profitably from this simple trading concept of the LAW of Charts™. Follow this link for more information about this ONLINE SEMINAR which you can watch directly at your computer!
Next Chat: Wednesday, February 6, 2008.
We hope you will join us!
Here is where you login to Joe's Wednesday Chat
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you missed any Chats but want to be up-to-date
Next Chat: Wednesday, February 6, 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!