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Spread Scan Issue: September 24, 2008 - Volume 213
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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: 10 Spread Trading Tips
- Join Joe Ross' Traders Money Club: All the features you would expect...
- Next Joe Ross Live Chats for Traders: Wednesday, September 24, 2008
- About Joe Ross and Andy Jordan
- Traders Forum Community
- 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 KWZ8 – KWN9: long December '08 Kansas Wheat and short July '09 Kansas Wheat
Today we consider a Kansas City Wheat calendar spread: long December '08 Kansas Wheat and short July '09 Kansas Wheat (KWZ8 – KWN9). The spread was in a downtrend in March, April and May 2008, and has been trading sideways since then. The seasonal time window goes from 8/19 until 10/22, but the strongest seasonal move usually occurs in the first two weeks of October.
Traders may want to enter the spread at a value of -38 limit. Initial margin is $625 (reduced). Suggested risk is $500. Initial projected objective is $500, then higher. Basis is seasonal (8/19 – 10/22).
On September 16 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering a currency spread (Globex) SFZ8 – JYZ8 at -4.75 stop on close. Initial margin is $1,580 (reduced). Suggested risk is $2,500. Initial projected objective is $2,500, then higher. Basis is seasonal (9/18 – 10/2) and a 1-2-3 low."
Here's how we suggested managing this trade:
09/17 Suggested stop on close at -6.40.
09/19 Suggested stop on close at -5.25.
09/22 Suggested stop on close at -4.60.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
10 Spread Trading Tips
(Please go back to the last issue to read further Tips!)
8) What you see is not always what you get.
This is by far the most recurring subject among the students. It happens almost every day that a student calls saying, for example: “I was trying to sell the January-October Live Cattle spread at 300 and the price traded at 320; how come I am not filled???” It’s a legitimate question that has a very simple explanation. Spread trades/quotes are not officially posted by the exchange; not even my $1000 a month quote system provides me with the actual spread trades from the pit; the only quotes I see are given by the difference of the 2 outright futures (so-called legs) which give me a pretty good idea most of the time, but do not always represent what the spread is actually doing. I can see the differential on my screen constantly moving, while the actual spread on the floor might not have traded for hours. Often (this is true for spreads entered into not very liquid markets) one of the two legs will trade every minute while the other leg will not trade at all. Naturally, if I try to sell the spread at 300 and my buy side is stuck (not trading) at 100 while the sell side is going from 380 to 430, on my screen I see 330 (100 from the buy minus 430 from the sell) but it’s clear that the differential I see is only an artificial quote and not the real spread. The good news is that most calendar spreads are now electronically traded, and all electronic spreads are now available on CQG trader (costs only $45 a month) which not only shows the last price, but even the bid and offer and the volume and market depth (5 best bid and offers with volumes).... to be continued in next Spread Scan issue #214!
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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 (now including 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,
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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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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!