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Spread Scan Issue: February 20, 2008 - Volume 182
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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
- Get help - train - build motivation and increase profit:
Andy's Online Spread Training gets the job done! - 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 equity spread in the energy complex: long June '08 RBOB Gasoline and short June '08 Crude Oil (420*RBM8 – 1000*CLM8). After moving sideways between August and December 2007, the spread dropped down to $14,100 in January ’08. The spread has been in an uptrend since then. With seasonal help between approximately 02/13 to 03/30 the spread has potential to move even higher. It seems the spread is trading at the upper bound of its uptrend channel (blue lines) at the moment. I personally would try to enter lower on weakness.
Traders may want to enter the spread at a spread value of $15,500 or lower. Initial margin for the spread is $4,500. Suggested risk is $1,000. Initial projected objective is $1,000, then a move to $17,000 or higher. Basis is seasonal (app. 2/13 – 3/30) and a 1-2-3 low. Comment: Even though I show the pit contracts on the chart above, the volume is in the electronic market. Be careful to check bid/ask on the entry/exit, because both contract months are not very liquid.
On January 28 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a Lean Hogs calendar spread LHQ8 – LHV8 (pit) at a spread value of 4.6. Initial margin is $945 (reduced margin). Suggested risk is $400. Initial projected objective is $400, then a move to 7.5 or higher. Basis is seasonal (app. 1/25 – 4/20) and a 1-2-3 low. Comment: Volume in both months is not very exiting especially in the elec. markets you will probably get a lot of slippage. I would prefer the pit market for trading this spread."
Here's how we suggested managing this trade:
01/28 Suggest entering tomorrow 01/29 at 4.5 limit.
01/29 It was possible to enter today at 4.5 limit.
01/30 Suggest moving stop to 4.2.
01/31 Suggest moving stop to 4.5
02/05 Spread moved up the first suggested target. Suggest moving stop to 5.0.
02/08 Suggest moving stop to 5.7.
02/15 Suggest moving stop to 5.8.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, by legging into a Minneapolis Wheat spread I got a really bad fill. Would I have done better by using a spread market order?"
Andy: There is normally not much of a difference between using two outright futures market orders versus a market spread order. The outright futures pit and the spread pit are connected to each other in the sense that they look at each other to see what is going on. You should end up with almost the same result. Very often the spread pit is “integrated” into the outright futures pit, with both orders being filled by the same person. Markets like Minneapolis or Kansas Wheat are always a bit tricky. Maybe you want to try a spread limit order next time for your entry and exit. When trading a market for the first time, I always recommend trying it first with only a few contracts to see the “character” of the market. You can also talk to your broker. He should know what kind of fills you can expect from the market you want to trade.
Get help - train - build motivation and increase profits:
Andy Jordan's Online Spread Training gets the job done!Where do you stand in your trading? You may have invested your money and countless hours struggling to find a winning way to trade.
You may even have previously looked into spread trading, but you have not been able to figure exactly how to use spread trading to be consistently profitable.
If so, then all you need is a helping hand to turn your trading into a successful business.
Learn, train, and interact online with a professional Spread Trader for 1 training week
SPREAD TRADING is one of the most consistently reliable, potentially profitable, and safest ways to achieve real SUCCESS in trading.
Here is the knowledge you will gain from
the Spread Training:
- How to select the right markets and the right spreads. Andy will show you five distinct ways to dig out high probability spreads.
- How to use seasonal and correlation charts to find high percentage trades.
- How to use backwardation, observation, and chart formation to pluck out really great trades.
- How to use trend lines, and resistance and support areas in your spread trading.
- How to enter or exit the spreads with regard to the market and the volume conditions. Andy will work with you to develop the best ways for YOUR trading.
- How to develop, step-by-step, a trading plan including money management, risk management, and trade management.
- And more, more, and more. Let yourself plunge into the depth of the spread trading knowledge Andy has to offer you!
Follow this link to find out more and schedule your time with Andy today...Learning and having Andy tackle the questions you've always wanted answered - can you think of a better way to become a successful spread trader?
Next Chat: Wednesday, February 13, 2008.
We hope you will join us!
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you missed any Chats but want to be up-to-date
Next Chat: Wednesday, February 13, 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!