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Spread Scan Issue: April 23, 2008 - Volume 191
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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 the most efficient use of YOUR money - read how to take advantage
of high percentage trades - Next Joe Ross Live Chats for Traders
- 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 LHN8 – LHZ8: long July '08 Lean Hogs and short December '08 Lean Hogs (CME)
Today we consider a Lean Hogs (CME) calendar spread: long July '08 Lean Hogs and short December '08 Lean Hogs (LHN8 – LHZ8). Even if this spread is still in a down trend, it could be worth trying an entry after a breakout of its 1-2-3 low to the up side. The seasonal time window is very small (04/16 – 05/01) and therefore I wouldn’t wait too long with the entry. If the spread doesn’t move up today or tomorrow, I would skip the trade.
Traders may want to enter the spread at a value of -0.85 stop on close. Initial margin is $1,219 (reduced margin). Suggested risk is $500. Initial projected objective is $500, then a move to 3.0 or higher. Basis is seasonal (4/16 – 5/1) and a 1-2-3 low. Comment: This spread is not very liquid so you might want to use the open outcry instead of the Globex.
On April 10 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a corn calendar spread CZ9 – CZ8 (elec.) MOC tomorrow. Initial margin is $405 (reduced margin). Suggested risk is $500. Initial projected objective is $500, then higher. Basis is seasonal (3/31 – 4/28) and a 1-2-3 low. Comment: We tried this one already and got burned on the strong down move in March. It seems the spread is now moving the right way."
Here's how we suggested managing this trade:
04/11 In? Suggested stop on close at -47.
04/15 Suggest exiting tomorrow, if the spread doesn’t move up. The elec. spread traded a bit higher (around 46) on the close.
04/17 Suggested stop on close at -46.
04/18 Suggested stop on close at -43.
04/21 Suggested stop on close at -34.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, can I place spread orders at the e-CBOT or any other electronic market? "
I don’t know if this is true for all electronic markets, but I will try to explain the basic information for spread orders in electronic side-by-side markets at the eCBOT and Globex.
Intra-market spreads (i.e. W - W or ED - ED) are possible. It is important to know that your spread order will also be executed if both legs of your spread are able to get filled. For example, you want to sell the spread X – Y at a premium of 10. If the exchange trading system can make sure you get filled on both sides with a difference of 10, it will lock in both trades for both legs and execute them simultaneously.
You will probably run into problems when you try to place an inter-market spread like S – W. So far, most trading systems will not allow inter-market spreads. You will need to "leg in," that is place the order for each leg separately, in such an inter-market spread.
It is a always a good idea to talk with your broker regarding how to place these orders in the electronic markets.
Get the most efficient use of YOUR money - read how to take advantage of high percentage tradesJoe Ross has 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 Dates for April:
Wednesday, April 23, 2008
Wednesday, April 30, 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 Dates for April:
Wednesday, April 23, 2008
Wednesday, April 30, 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!