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Spread Scan Issue: February 27, 2008 - Volume 183
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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
- How Traders can get the most efficient use of their money - take advantage
of high percentage trades
- 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 a Soybean Meal calendar spread: long July '08 Soybean Meal and short December '08 Soybean Meal (SMN8 – SMZ8). Since plunging in January 2008, the spread has been trading upward. Seasonality (app. 02/25 – 05/01) should help the spread to move even higher. I personally would try to enter at the low of the last Ross Hook. If you don’t like this idea, you might want to wait until the spread breaks out of the February high at 34.5.
Traders may want to enter the spread at market on close. Initial margin is $1,080 (reduced margin). Suggested risk is $800. Initial projected objective is $800, then higher. Basis is seasonal and a Ross Hook.
On February 19 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a calendar spread in the Soybeans SN8 – SK8 MOC tomorrow 02/20. Initial margin is $135 (reduced margin). Suggested risk is $200. Initial projected objective is $200, then higher. Basis is seasonal (app. 2/18 – 3/28) and a 1-2-3 low."
Here's how we suggested managing this trade:
02/20 In? Suggested stop at 10.
02/21 Suggest moving stop to 11.
02/25 Suggest taking first profits tomorrow if possible. Suggested stop on close at 12 ¼.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, I have done some day trading and want to start with spread trading now. Can I use my online broker, or would you recommend my moving my account to another broker?"
Andy: While day trading depends mostly on speed and low commissions, spread or position trading has other needs. For spread or position trading, you want to be flexible. If possible, you want to be able to trade all kinds of markets with only one account, which is not important if you are trading an electronic or open outcry market. Most online brokers allow only electronic markets.
Having a good broker can also help to save you a lot of money. You will enter into markets you probably have never before traded. He can get you the information you need before you place your first order. He can also support you whenever it comes to extreme market conditions like the one we had recently in the wheat. Can you imagine what would happen if you tried to enter or exit a wheat spread using two separate market orders? Well, I can tell you, that could get very expensive. A good broker can even give you full assistance with your trades. This means that you advise him what to do before the market opens, and he will execute your orders and watch the market for you. Of course he will charge more commission for this extra service, but trading this way is emotionally much more comfortable, and you can save money by not needing real time or even delayed data. An End of Day charting software like Nextrend, for only $14.95, would be all you need.
All in all it depends on your situation. Do you want to execute all the trades on your own, or would you like your broker to take care of your entries and exits? Even if you continue placing your own trades, do you want to be able to call on a live human being when market conditions become extreme, or if there has been some error in your trade? My advice is to consider more than the commission. Only one tick difference in your fills and the “good commission” is gone. Think about your needs, and then make your choice.
How Traders can get the most efficient use of their money - take advantage of high percentage tradesJoe Ross 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 he knows are doing this, but you are not going to see them interviewed on any TV money show. They are too busy living the good life. But they are the most knowledgeable, successful, and respected among trading professionals who are "in the know."
Joe's idea was 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.
- Is it really possible to find trades that win 80% or more of the time?
- Is it possible to get fantastic leverage in the use your money?
- Is it possible to never have to worry about being stopped out?
How would you like to be able to take advantage of repetitive events to the point of 80% or greater accuracy time after time after time?
What would it be like if you could discover trades that trend, and trend, and then trend some more?
We've kept you in suspense long enough. The way of trading Joe is talking about has been successful for him throughout his entire trading career.
What he's talking about is learning to trade spreads, and he believes almost anyone, with the right training, has the potential to quickly and easily make money trading them.
Spread trading can be incredibly powerful, profitable,
consistent, and easy to implement.For years Joe has been spilling his guts on how people can succeed at trading, while giving away daily advice, weekly trades, answers to questions posted in his forum, and via weekly online chats. He's been doing this since 1989.
How or where does one start on this less risky way of trading?
By reading Joe's book Trading Spreads and Seasonals.Joe's manual Trading Spreads and Seasonals is a self-contained training course designed to get you to an intermediate level of spread trading. Joe brings you down-to-earth with his vast knowledge of one of the most fundamental ways anyone can ever learn to trade.
You don't have to be afraid of the "speculative nature" of futures. The content of this book helps you structure "winning" trades the same ways the pros do.
Joe himself stated his reasons for writing this book. The text follows:
"Spread trading is virtually a lost art except among professionals, who, by the way, have never stopped using spreads since trading began.
"I encourage every one of my students and subscribers to read this book. Spread trading is probably the best way to trade that I've ever encountered. It beats the socks off both options and outright futures trading. It is far more relaxed than day trading. Much of the stress of trading is removed with spread trading."For more information on this manual, please follow this link...
Next Chat: Wednesday, February 27, 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, February 27, 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!