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Spread Scan Issue: August 20, 2008 - Volume 208
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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 Law of Charts IN ACTION - WATCH ONLINE VIDEO TODAY!
- Next Joe Ross Live Chats for Traders: Wednesday, August 20, 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 EDH9 – EDU8: long March '09 Eurodollars and short September '08 Eurodollars
Today we consider an Eurodollars calendar spread (GLOBEX): long March '09 Eurodollars and short September '08 Eurodollars (EDH9 – EDU8). After moving up nicely in June and July, the spread has been in a tight trading range (-0.33 and -0.23). Last Tuesday the spread broke out of its range, and it looks as if the spread could now move higher. Can seasonality help to move the spread up to break even or higher?
Traders may want to enter the spread at a value of -0.185 stop on close. Initial margin is $270 (reduced). Suggested risk is $450. Initial projected objective is $450, then higher. Basis is seasonal (8/11 – 9/11) and a breakout of a range.
On July 22 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a currency equity spread 1250*JYU8 – 625*BPU8 at -$6,300 stop on close. Initial margin is $2,295 (reduced margin). Suggested risk is $1,700. Initial projected objective is $1,700, then higher. Basis is seasonal (8/8 – 8/18) and a RH."
Here's how we suggested managing this trade:
08/08 Suggested stop on close at -$7,300.
08/11 Suggested stop on close at -$6,800.
08/12 It was possible to cash in the first profits today. Suggested stop on close at $5,700.
08/13 Suggested stop on close at -$4,500.
08/13 Suggested stop on close at -$4,250.
08/15 Suggested stop on close at -$4,050.
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
Bull and Bear Spreads
Bull and bear spreads perform opposite economic functions.
The former rations demand, the latter distributes supply.
In most demand-driven markets for a physical commodity, nearby contracts increase relative to deferred contracts. In the first stage, usually associated with plentiful supply and futures in their normal progression (Contango — prices being progressively higher in the deferred months), cash prices stabilize while commercials continue to buy what they need as they need it, as opposed to forward pricing. This buying on an "as needed" basis steadies the nearby futures while further eroding deferred prices. As demand begins to outstrip production, cash prices rise.
Knowledgeable commercials not only continue to buy their immediate needs, but also begin to slowly accumulate physical inventories.
Their actions affect futures in the same way as when you toss a pebble into a pond and create concentric circles — most intense nearby, and progressively less with distance.
In the latter stages, if demand exceeds supply, the price for nearby delivery can exceed that for deferred delivery as the market wants the physical commodity now, not later. If that keeps up, futures can go into backwardation (inverted market), a price structure in which progressively deferred contracts are priced at progressively greater discounts.
The eventual economic function of continued bull spreading is to restrict supply to the most productive (efficient) demand by making immediate consumption the most expensive.
The Law of Charts™ IN ACTION - WATCH ONLINE VIDEO TODAY!If you want to avoid loss after loss, and if you really want to become a successful trader, then you definitely should start trading with a defined concept.
My students have verified that once you understand the markets, all you’ll ever need to trade them profitably is an understanding of the Law of Charts™ along with the dynamics of the market. In my online seminar you will find both, and a whole lot more. We present some indicators, but they are used in an unorthodox manner.
People think that the more complicated something is, the better it is, but the truth of the matter is just the opposite.
My seminar on The Law of Charts brings you the pure simplicity of what the markets are all about. Trading does not have to be complicated.
In my online seminar you will be looking at the truth of the markets in virtually every scene. There is truth in every price bar you see, and in every group of price bars there is additional truth. It doesn’t matter whether you use traditional or candlestick price bars. You can see the truth with line or point-and-figure graphs.
The truth is the truth, and you will find it on the charts.
The Online Video Seminar gives you a very brief presentation of the Law of Charts formations and a very detailed explanation of how to implement the Law of Charts for making profits. This is what we really want to teach you, and it is what you want to come to understand and take advantage of.
In addition, the online video seminar gives you the rationale behind the Traders Trick Entry™. You will learn what causes Ross hooks™, and how to trade them. You will see how and when to use the Law of Charts when prices are in consolidation.
There is really much, much more, because Joe Ross elaborates on the slides, giving you gems of information with each slide that you will not see in the free pdf Law of Charts material on our website, nor in any of his books. Please follow this link and visit our website for more detailed information about Joe's popular and highly recommended Online Video Seminar on The Law of Charts...
FRESH PERSPECTIVES - Ready for YOUR active participation.
Joe's live chats are an incomparable service from Trading Educators. The chats encourage forward-thinking, and inspire 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:
Join the chats in August:
Wednesday, August 20, 2008
Wednesday, August 27, 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
Join the chats in August:
Wednesday, August 20, 2008
Wednesday, August 27, 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:
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(TM), and has set new standards for low-risk trading with his concepts of The Law of Charts(TM) and the Traders Trick Entry(TM). 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 approaches to trading. 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: "I really can't thank you enough for the training you gave me...The impact you have had on my life, now and in the future, is immeasurable and I am truly grateful for having met you in this lifetime." 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: Traders Money Club™, Chart Scan(TM), Spread Scan(TM) , and Traders Notebook(TM). 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:
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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We created our Trading Community Forum for the purpose of providing positive, uplifting educational material to traders who want to participate. There is much to be gained from the collective wisdom and experiences of those who choose to participate. Let’s share what we have learned that has been helpful. Let’s all push forward to exchange new ideas and interesting concepts. |
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 that 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!