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.

Be sure to read through our free powerpoint spread presentation which describes the rationale for trading spreads, and gives you quite a bit of information about what they are and their advantages. Follow this link to our Spread Trading Website to read through Joe Ross' free powerpoint presentation: Spread Trading - A Whole New Way to Trade. Weekly Spread Scan Example This week we look at 625*BPM1 – 1,250*JYM1: long June 2011 British Pound and short June 2011 Japanese Yen Today we consider another inter-market spread in the currencies: long June 2011 British Pound and short June 2011 Japanese Yen (625*BPM1 – 1,250*JYM1). After testing the low of a wide range at -$57,000 in March, the spread moved up strongly and reached -$45,000 after only 2 weeks, which demonstrates the high volatility of this spread. Since then, the spread has been in a downtrend, trading now at former support levels around -$53,800. Will seasonality during June help move the spread higher? A breakout above -$52,300 might work as an entry signal, even if the current chart formation doesn't show a perfect 1-2-3 low. Traders with smaller accounts might want to use the ETF spread 1*FXB – 2*FXY instead (please note the ratio of 1:2).

Previous Trades

On May 5 we told subscribers of our professional daily spreads & position/swing trading newsletter, Traders Notebook, "Consider entering a Crude Oil calendar spread: long December and short July Crude Oil at 0.50 limit (GTC). Suggested risk is $500; initial projected objective is $500, then higher. Basis is seasonal (5/16 – 6/6) and a 1-2-3 low (in a sideways market)."

Here's how we suggested managing this trade:

05/06 In at 0.50 overnight; it was possible to cash in the first lot at 0.85 or even better (see e-mail); suggested stop on close at b/e.

05/10 Suggested stop on close at 0.70.

05/13 Suggested stop on close at 0.80.

05/16 Suggested second target around 1.70.

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

Be sure to read through our free powerpoint spread presentation which describes the rationale for trading spreads, and gives you quite a bit of information about what they are and their advantages. Follow this link to our Spread Trading Website to read through Joe Ross' free powerpoint presentation: Spread Trading - A Whole New Way to Trade.

Andy's Trading Article

Student's Question: Hi Andy! I have read in Spread Scan that you use seasonality for your trade selection. Is seasonality the same in all markets, or do you think some markets behave more seasonally than others?

Andy: You can find seasonality in all markets, but I think there are large differences between the “reliability” or “strength” of seasonality in various markets. Personally, I believe seasonality is strongest in the commodity markets. In all the markets where you have a physical product, there is a production cycle during the year. Because the production cycle is always the same, you get typical seasonal behaviors in those markets. Other markets, like the indices, also show a seasonal pattern, but I don't think it's as strong as in the commodity markets.

Seasonality is only one criteria among many, and I would never recommend any entry based only on statistics. You have to look at the current chart of the current spread to see what is going on. That’s the reality of what we have to trade!

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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.
  
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Copyright 2011. Published by Trading Educators, Inc.
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