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Spread Scan Issue: May 7, 2008 - Volume 193
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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 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 CCU8 – CCN8: long September '08 Cocoa and short July '08 Cocoa
Today we consider a Cocoa (ICE) calendar spread: long September '08 Cocoa and short July '08 Cocoa (CCU8 – CCN8). After trading sideways for the last few months, the spread moved down in April to -40, which is a very low level. The spread has been below -50 only 3 times in the last 25 years. The seasonal time window starts around May 12, and should help the spread to move higher; maybe back to 20
Traders may want to enter the spread at a value of -33 limit. Initial margin is $350 (reduced margin). Suggested risk is $150. Initial projected objective is $150, then a move to 20 or higher. Basis is seasonal (5/12 – 6/2).
On April 23 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering an inter-market meats spread LCZ8 – LHZ8 at 27.85 stop market. Initial margin is $1,492 (reduced margin). Suggested risk is $600. Initial projected objective is $500, then 32 or higher. Basis is seasonal (5/7 – 5/27) and a 1-2-3 low."
Here's how we suggested managing this trade:
04/24 In? Suggested stop on close at 27.00.
04/28 Suggested stop on close at 29.15.
04/29 Suggested stop on close at 29.70. Suggested final target at 31.40.
05/02 Out?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, should I be looking at fundamentals?"
Andy: There are a number of reasons that cause many traders to favor technical analysis over fundamentals. For starters, fundamental traders tend to be commercial firms; that is, they are involved in the actual production or consumption of a commodity. Because of this, they have intimate, day-to-day knowledge of supply and demand. The commercial firms have information that most of us cannot afford to acquire. For example, are you able to check global soil conditions in an agricultural commodity you wish to trade? Can you check crop conditions? Commercial firms can and do check such things. They also check long-range weather forecasts, crop yield forecasts, and existing inventories.
Commercials have the best fundamental information on a market. You and I have a harder time getting pertinent fundamental information, especially in markets that are more thinly traded. Fundamental analysis generally requires a longer term trading horizon. Fundamentals tend to change more slowly than do technical conditions.
Technical traders tend to be almost everyone except the commercials, such as commodity pools, funds, and retail speculators. Speculators tend to trade in shorter time frames, and technical analysis may better serve shorter term traders. It's unlikely that fundamental analysis will tell you where beans may be next week, but technical analysis may do so.
The widespread use of technical analysis raises an interesting question - does technical analysis work because it actually helps interpret the markets, or does it work because it is widely followed, and thus creates self-fulfilling prophecies for the markets? Whichever it is, I don't care — as long as it works!
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 Dates for May:
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 Dates for May:
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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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!