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Spread Scan Issue: April 30, 2008 - Volume 192
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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
- Increase YOUR profits - get help and be trained by one who knows HOW:
Andy's Online Spread Training gets the job done! - 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 100*SMN8 – 600*BON8: long July '08 Soybean Meal and short July '08 Soybean Oil
Today we consider an inter-market equity spread in the soy complex: long July '08 Soybean Meal and short July '08 Soybean Oil (100*SMN8 – 600*BON8). After falling like a rock in February, the spread has tended to move higher. The spread moved above break even in March, but could not hold this level. It fell back down to -$2,800 in April, the same level as the sideways market in March. Seasonality started on April 24, and should help to move the spread higher.
Traders may want to enter the spread at a value of -$1,000 stop on close. Initial margin is $4,995 (no reduced margin). Suggested risk is $1,200. Initial projected objective is $1,200, then a move to 3,000 or higher. Basis is seasonal (4/24 – 6/11) and a 1-2-3 low. Because of the different values of each unit move of Soybean Meal and Soybean Oil, we have to multiply the buy side by 100 and the sell side by 600 to get the right equity chart. The spread is 1:1.
On April 16 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering an inter-market equity spread 500*FCK8 – 400*LCM8 at $15,620 stop on close. Initial margin is $1,430. Suggested risk is $600. Initial projected objective is $600, then higher. Basis is seasonal (4/11 – 5/22) and a 1-2-3 low."
Here's how we suggested managing this trade:
04/17 In? Suggested stop on close at $15,500.
04/21 Suggested stop on close at $15,760.
04/22 Suggested stop on close at $15,800.
04/23 Suggested stop on close at $15,870.
04/24 Suggested stop on close at $16,070.
04/25 Suggested stop on close at $16,150.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
It’s all about the exits!
Whenever my spread trading is not at its best, I start trying to find a better entry strategy. I play with indicators or chart formations trying hard to get a better trading result. Very often I believe I've found something spectacular, but most of the time I end up admitting it is not about the entry. Whenever I enter into a spread trade, I just don’t know what will happen next. I use the trend, seasonality, and I check the COT report to see what the big players are doing. Together with simple chart formations, I make my decisions for my next entry. But even though seasonality tells you this trade has worked out 90% in the last 15 years, you just don’t know what will happen the next day. The trade can move $2,000 against you, ending up with a $150 profit. Statistically, this was a winning trade. But it doesn’t help when you got stopped out with a $1,000 loss.
But what can a trader do if entries don’t make the big difference? We have to focus on the exits. That’s something we can control. We can control when we want to get out of the trades. We can set our initial stop, our target, and our trailing stop strategy for each trade. We know we have to get out fast whenever the trade is going against us, and we have to stick with the trade whenever it is moving our way. Only if we are able to make 3, 4 or more times the initial risk from time to time are we going to succeed on the long run. Unfortunately, we will not find something like the “holy grail of exit” strategy. We have to find something that fits our personality and our trading account. We can use whatever helps us to get out fast on losing trades, and lets us stay with the good ones. A simple money management trailing stop works just fine, but a volatility stop will also do a good job. Trading is actually very simple, it is just very hard to do.
Increase YOUR profits - get help and be trained by one who knows HOW:
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 one 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, practicing, 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 Date for April and May:
Wednesday, April 30, 2008
Wednesday, May 07, 2008
Wednesday, May 14, 2008
Wednesday, May 21, 2008
Wednesday, May 28, 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 Date for April and May:
Wednesday, April 30, 2008
Wednesday, May 07, 2008
Wednesday, May 14, 2008
Wednesday, May 21, 2008
Wednesday, May 28, 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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Phone: 800-476-7796 or 512-249-6930
Office hours are Monday - Friday 9 A.M. to 5 P.M., U.S.C.T.Questions or Comments? Please email us: support@spread-trading.com
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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!