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Spread Scan Issue: March 05, 2008 - Volume 184
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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
- Don't miss out any longer: make Trading Spreads part of your Trading Business
- 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 Natural Gas calendar spread: long May '08 Natural Gas and short April '08 Natural Gas (NGK8 – NGJ8). This spread chart doesn’t look very attractive due to the spikes in November ’07 and December ’07. I would recommend ignoring those spikes (which happened mainly because of low volume at that time) and focus on what is happening right now. After plunging in February ’08, the spread now seems to be very strong. The seasonal time window is very small. The spread should move up immediately after the entry.
Traders may want to enter the spread at a spread value of 0.062 limit. Initial margin is $750 (reduced margin). Suggested risk is $270. Initial projected objective is $270, then higher. Basis is seasonal (app. 2/28 – 3/12) and a 1-2-3 low.
On February 24 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a Soybean Meal calendar spread SMN8 – SMZ8 (elec.) at 26 stop 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 RH. Comment: The idea is to enter now around the low of the RH with a close stop. If you don’t like the idea, you might want to wait until the spread breaks out of the RH."
Here's how we suggested managing this trade:
02/25 Suggest entering MOC if not already in the trade. Suggested stop on close at 21.
02/26 Suggest taking first profits at around 34.5. Suggested stop on close at 22.9.
02/27 Spread hit first suggested target. Suggested stop on close at 26.7.
02/28 Suggested stop on close at 33.4.
02/29 Suggested stop on close at 37.7.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, the last 2 months have been very tough for my spread trading. Is there any time of the year when you think it is better not to trade spreads? "
Andy: Unfortunately, spread trading (like any other way of trading) gets flat or more difficult from time to time, and there is not much you can do about it. I have not seen any predictable “seasonality” in my spread trading so far, but there are times when spread trading becomes very tough for me. But good money management helps me to get through the difficult times. What can you do when times are getting tough? Well, you can reduce your risk. Slow down your trading until it gets better again. Do the opposite when your trading is successful. It’s like driving a car. You cannot get from one location to another by driving with a constant velocity. You have to slow down when you have a lot of traffic, and you can go faster when traffic lightens up. Try to have the same flexibility in your trading.
HAVE YOU BEEN MISSING OUT ON ALL THE WONDERFUL BENEFITS OF SPREAD TRADING?
YOU DON'T HAVE TO MISS OUT ANY LONGER!Take Joe Ross' Spread Trading Seminar - the World's Only Complete Spread Trading Seminar is now available online.
Learn one of the most PROFITABLE and RELAXED ways to trade!If you haven't made Spread Trading part of your Trading Business yet, then we suggest that you take time to start doing so today. You need to be aware that the world is entering a NEW ERA of trading in which trading in commodities will become more important than trading in financial instruments.
Already many commodities have reached new all-time highs. Let’s face it, the world of trading does not consist of trading only stock indexes, currencies, and debt instruments. The shaky global financial situation has come close to melt-down a couple of times in the last two years. Commodities are up in triple-digit numbers. For the most efficient use of your trading capital, the safest way to trade commodities is to trade spreads.
Spreads offer you the best and most efficient use of your trading capital. You will regularly find spreads that are trading for one-tenth the margin required to trade in any other market. That means you can trade 10 spreads using the same amount of capital you would have to put up to trade one futures contract.
The Number One enemy of every trader is that of "stop running." Spreads completely avoid stop running. There are no stops, and so stop running cannot occur. You can spread just about anything imaginable if you understand how spreading works.
Joe Ross and Trading Educators provide an easy way for you to learn everything there is to know about Spread Trading. Through Joe's original approach to Spread Trading, we can offer you a complete Spread Training Program. We don't want you to just buy and learn — we want to see how you succeed as a professional and profitable Spread Trader when you send us your testimony. Learn from a Pro and you will become a Pro.
To take JOE'S ONLINE SPREAD TRADING SEMINAR at your convenience, there is no need for you to travel far or spend lots of money for airline tickets, gasoline, or hotel accomodations. Learn comfortably at home or in your office. All you need nowadays to connect worldwide is a Computer or Laptop with Internet connection to download the seminar video onto your computer. You don't have to wait any longer. Follow this link to our Trading Educators site to find out more about the Online Spread Seminar with Joe Ross.
Next Chat: Wednesday, March 5, 2008.
and Wednesday, March 12, 2008
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Next Chat: Wednesday, March 5, 2008.
and Wednesday, March 12, 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!