Edition 306      Wednesday, July 7, 2010

Spread Scan with Commentary

Commentary by Andy Jordan Trader, Trading Mentor for Spread & Swing Trading Trading Educators, Inc. 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.

Thank you to those of you who helped us by sharing your thoughts regarding Spread Scan through filling out the brief survey we offered last week. If you haven't yet filled out the survey, please follow this link to the short feedback form. I would really appreciate everyone's input about my free Spread Trading Newsletter. Thank you so much. Weekly Spread Scan Example This week we look at NGX0 – NGV0: long November 2010 Natural Gas and short October 2010 Natural Gas Today we consider a Natural Gas calendar spread: long November 2010 Natural Gas and short October 2010 Natural Gas (NGX0 – NGV0). The spread seemed to stabilize around 0.200 (1-2-3 low) after its down move in May and June. Will a break out of the last Ross Hook be the right entry signal, and can seasonality (07/16 – 09/10) help moving the spread higher?

Previous Trades

On June 14 we told subscribers of our professional daily spreads & position/swing trading newsletter Traders Notebook, "Consider entering a Sugar #11 spread: long March 2011 and short July 2011 Sugar (SBH1 – SBN1) at -0.20 limit GTC. Suggested risk is $350; suggested first target at +0.15. Basis is seasonal (6/7 – 7/30) and a 1-2-3 low."

Here's how we suggested managing this trade:

06/14  Some traders are already in the spread; all other might keep on trying.
06/22  Suggest canceling the entry order at -0.20 if you are not in the trade yet. The spread reached the first target; suggest moving the stop on close to break even.
06/24  Suggest exiting the spread on a close below -0.10.
06/28  Suggest exiting the spread on a close below 0.25.
06/30  Suggest exiting the spread on a close below 0.30.

Visit our Spread Website for more information about our daily newsletter, Traders Notebook.

Andy's Trading Articles

© 2010 by Trading Educators, Inc. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc

Student's Question: "Andy, I have been trading corn for several months using a $200 stop, and I am doing fine. Can I use the same $200 stop in other markets? My trading account is very small."

Andy: Protective stops have to be related to the strategy and the markets being traded. It is not a good idea to use a $200 stop that might be appropriate on a corn contract in sugar or the soybean market.  This is because each market has a different value and different volatility.  Protective stops should be linked to the volatility and value of the underlying market. 
 
It is also a major mistake to use a protective stop purely based on your account size and how much you are willing to lose.  If you have a $10,000 account and you don't want to risk more than $500 on any given trade, but the stop in this particular market and trade is at $750, you DON'T take the trade. Risk management and money management are major parts of trading, and have to be implemented into your trading strategy.

© 2010 by Trading Educators, Inc. Re-transmission or reproduction of any part of this material is strictly prohibited without the prior written consent of Trading Educators, Inc

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About Spread Scan

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.

About Andy Jordan

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 preference. 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 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.

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™, 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 (now including Antarctica) is huge. As one tutoring student, a successful trader, wrote: "You have no idea how much improvement in my life and in my trading efforts have those three days with you brought to me."

Joe Ross, the CEO of Trading Educators, 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 the primary author and Editor-in-Chief of the company's newsletters: Chart Scan™, Spread Scan™, Options 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"

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.

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