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Spread Scan Issue: May 14, 2008 - Volume 194
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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
- The Trader's Choice: Spread & Position Trades
- Next Joe Ross Live Chats for Traders: Wednesday, May 14, 2008
- About Joe Ross and Andy Jordan
- TE TRADERS FORUM
- 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 LCM8 – LHM: long June '08 Live Cattle (CME) and short June '08 Lean Hogs (CME)
Today we consider an inter-market meat spread: long June '08 Live Cattle and short June '08 Lean Hogs (LCM8 – LHM8). The spread has been trading in a trading range between 17.0 and 20.5 since June 2007. In January and February this year, the spread made a new high at 22.7 and a new low at 13.2, but has been back in its trading range since then. This spread has worked out 13 times in the last 15 years, with an average draw down of less then $380 in the last 10 years.
Traders may want to enter the spread at a value of 17.7 stop on close. Initial margin is $1,492 (reduced margin). Suggested risk is $1,200. Initial projected objective is $1,200, then higher. Basis is seasonal (5/17 – 5/28) and a 1-2-3 low.
On May 4 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a Live Cattle calendar spread LCZ8 – LCQ8 at 6.0 stop on close. Initial margin is $540 (reduced margin). Suggested risk is $440. Initial projected objective is $440, then a move to 8.5 or higher. Basis is seasonal (5/7 – 5/23) and a RH."
Here's how we suggested managing this trade:
05/05 In? Suggested stop on close at 5.3.
05/06 Suggested stop on close at 5.5.
05/07 Suggested stop on close at 6.35. Traders with multiple lots might take some money from the table.
05/09 Suggested stop on close at 6.55For 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, in your spread recommendations you give us a time window (i.e. 01/10 - 02/22) whenever the trade is seasonal. Do you recommend entering the trade only between these two dates?"
Andy: Seasonality doesn't always start and end at a precise date, and therefore the seasonal time window can be only a rough guess. Sometimes seasonality starts a month earlier or later, and sometimes you don't get the seasonal move at all. But if you want, you can do the following: start looking for an entry 10 days before and 10 days after the statistical entry date, and move your stop closer whenever you get close to the statistical exit date. Most important: always look at the current chart. All statistics or charts about seasonality are an additional help, but you can never base a trade only on information of the past. Always trade what you see on the current chart!
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FRESH PERSPECTIVES - Ready for YOUR active participation.
Joe's live chats are an incomparable service from Trading Educators. It encourages forward-thinking and inspires others by what is shared.
Gather up your questions and comments, and "meet" other traders on line. Joe Ross will answer everything he can - come and join either his U.S. Live Chat or his Euro Live Chat:
Next Chat Dates for May:
Wednesday, May 14, 2008
Wednesday, May 21, 2008
Wednesday, May 28, 2008
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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 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.
ABOUT JOE ROSS:
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Joe Ross has been trading and investing since his first trade at the age of 14, and is a well known Master Trader and Investor. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits. Joe Ross is the discoverer of the Ross hook™, and has set new standards for low-risk trading with his concepts of "The Law of Charts™ " and the "Traders Trick Entry™." Joe was a private trader and investor for much of his life, but a serious health situation in the late 80's caused him to shift his focus, and that is when he decided to share his knowledge. After his recovery, he founded Trading Educators in 1988, to teach aspiring traders how to make profits using his trading approach. Joe Ross has written twelve major books and countless articles and essays about trading. All his books have become classics, and have been translated into various languages. His students from around the world number in the thousands. His file of letters containing thanks and appreciation from students on every continent (except Antarctica) is huge. As one student, a successful trader, wrote: "Your mastery of teaching is even greater than my mastery of trading." Joe Ross holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, Virginia. He is listed in "Who's Who in America." After 5 decades of trading and investing, Joe Ross still tutors, teaches, writes, and trades regularly. Joe is an active and integral part of Trading Educators. He is the primary author and Editor-in-Chief of the company's newsletters: Chart Scan™, Spread Scan™, and Traders Notebook™. He is also the host of the free Traders Live Chat, the free European Chat for Traders, and the moderator of his popular trading forum. |
Joe's philosophy for helping traders is:"Teach our students the truth in trading — teach them how to trade"
"Give them a way to earn while they learn, realizing that it takes time to develop a successful trader."
Joe sets forth the mission of Trading Educators as follows:
- To show aspiring futures traders the truth in trading by teaching them how to read a chart so that they can successfully trade what they see, and by revealing to them all of the insider knowledge they need in order to understand the markets.
- To enable them to trade profitably by training them to properly manage their trades as well as their mindset and self-control.
For information about Joe Ross and Trading Educators,
please follow this link...
ABOUT ANDY JORDAN:
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Educator for Spread Trading and
Editor of Traders Notebook & Spread Scan Andy Jordan made his first option trade at the age of 18. Since then he has been fascinated by the world of trading. In 2002 he met Joe Ross, and became interested in spread trading. Andy was then intensively tutored by Joe Ross and personnel at Trading Educators. Even though Andy has shown through live chats and in several trading journals that he is able to day trade today's markets, spread trading has always been his favorite. In addition to his own spread trading activities, Andy is the editor of Traders Notebook. For those interested in one-on-one personal coaching, Andy has developed and instructs a one-week online course in spread trading "Trade with a Pro," during which he demonstrates all aspects of trading from choosing the trades on through how and when to enter the trades, manage the trades, and exit the trades. Andy has developed a number of trading methods, among which are Andy’s E-mini 40 and a T-Bond trading method. Andy Jordan was born 1965 in Germany, but is currently living in the Caribbean. He has studied mathematics and business administration in Regensburg and Hagen, and holds a PhD in mathematics.
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If you are willing to share what works for you, then we welcome you. Your ideas may help someone else on their way to success. In turn, you may pick up an idea or piece of information that will help you to become a better trader.
Joe Ross has been trading the markets, virtually all of them, beginning well over 5 decades ago. He is now in his seventh decade of life, so he has the experiences of many years he is willing to share, as he is already doing through his books, seminars and newsletters.
We hope you decide to join us in our forum to make your contributions as well.
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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!