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Spread Scan Issue: January 28, 2009 - Volume 231
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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:
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.
This week we look at EDH9 – EDU9: long March '09 Eurodollar and short September '09 Eurodollar (Globex)
Today we consider a calendar Eurodollar spread (Globex): long March '09 Eurodollar and short September '09 Eurodollar (EDH9 – EDU9). The spread has been trading in a trading range between 0.0 and 0.3 since October. After testing the level of break-even several times, it could be the right moment for an entry. As long as the December low of -0.01 holds, seasonality (01/20 – 02/23) should work in our favor.
Traders may want to enter the spread market. Please ask your broker about the margin. Suggested risk is $350. Initial projected objective is $350, then a move to 0.40 or higher. Basis is seasonal (1/20 – 2/23) and a possible resistance around break-even
On January 11 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering an equity metal spread 50*SIH9 – 100*GCG9 (NYMEX) at a close above -$2,8645. Initial margin is $11,556 (fractionalized spread credit). Suggested risk is $3,000. Initial projected objective is $3,000, then a move higher. Basis is seasonal (1/16 – 2/22) and a 1-2-3 low."
Here's how we suggested managing this trade:
01/12 Suggest entering today at the opening.
01/13 In between -$28,900 and -$29,450 (spread was falling fast). Let’s use -$29,100 for our statistics. Suggested stop at -$31,000
01/14 Suggested stop at -$30,300.
01/16 Suggested stop at -$30,000.
01/26 Stop got hit. Suggest exiting at the open.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
Joe Ross on Technical Analysis
Technical analysis has three functions:it explains what happened in the past, describes current market conditions, and may be statistically predictive of future market movements. Technical analysis should not be based on any historical patterns like head and shoulders, flags, wedges, or triangles etc., unless they have been thoroughly tested for the commodity or stock on which they are used. Many patterns are very subjective, and have no validity relevant to the individual stock or commodity. Technical analysis should be based solely on price action, and analysis of where previous tops and bottoms have formed. Volume used to have no correlation with commodities price action, but some value applied to stocks. This was because daily volume on futures contracts was always posted a day late. These days that is no longer necessarily true. Volume in electronically traded markets is real.
Technical analysis has one decisive advantage over fundamental analysis — accurate timing to execute trades. Ask a fundamentalist when fundamentals turned bullish, and expect no reply. The theoretical basis for all technical analysis is found in George Santayana famous quote, "Those who cannot remember the past are condemned to repeat it."
I encourage every one of my students and subscribers
to read this book.
Spread trading is virtually a lost art except among professionals, who, by the way, have never stopped using spreads since trading began. I encourage every one of my students and subscribers to read this book. Spread trading is probably the best way to trade that I've ever encountered. It beats the socks off both options and outright futures trading. It is far more relaxed than day trading. Much of the stress of trading is removed with spread trading.
You don't have to be afraid of the "speculative nature" of futures. The content of this book helps you structure "winning" trades the same ways the pros do.
Joe's manual Trading Spreads and Seasonals is a self-contained training course designed to get you to an intermediate level of spread trading. Joe brings you down-to-earth with his vast knowledge of one of the most fundamental ways anyone can ever learn to trade.
For more information on this manual, please follow this link...
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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:
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Wednesday, January 28, 2009
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Chats for January 2009:
Wednesday, January 28, 2009
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 (now including Antarctica) is huge. As one student, a successful trader, wrote: "Thanks again for your trust and patience...Joe is a fountain of knowledge...but it is his wisdom that really sets him apart." 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(TM), Spread Scan(TM) , Traders Money Club™ 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. Andy is the founder and president of Jordan Trading, S. A. 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 an online course in spread trading, "Trading Mentoring - 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 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!