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 read through Joe Ross' free powerpoint presentation: Spread Trading - A Whole New Way to Trade. Weekly Spread Scan Example This week we look at 500*FCU1 - 400*LCV1: long September 2011 Feeder Cattle and short October 2011 Live Cattle Today we consider an inter-market equity spread in the meats: long September 2011 Feeder Cattle and short October 2011 Live Cattle (500*FCU1 - 400*LCV1). After showing a nice uptrend in February and March, the spread traded sideways for the most part in April, before it dropped lower in May. Now, after testing the January high at around $18,000, the spread seemed to have stabilized, and might get ready for the next up move. Seasonality usually drives this spread higher in May and June. Has seasonality failed this year, or will it still happen with some delay? Please note: because of the different values of each unit move of the Feeder Cattle and Live Cattle, we have to multiply the buy side by 500 and the sell side by 400 to get the right equity chart. The spread is 1:1.

Previous Trades

On May 25 we told subscribers of our professional daily spreads & position/swing trading newsletter, Traders Notebook, "Consider entering an inter-market spread: long July Soybeans and short July Wheat (SN1 - WN1) at 560 or better. Suggested risk is $1,400; initial projected objective is $1,400, or higher. Basis is seasonal. Comment: Traders with smaller accounts might want to trade the mini contracts with a risk of about $280."

Here's how we suggested managing this trade:

05/27 In at 560; suggested stop on close at 540; suggested first target at 590.

05/31 It was possible to cash in the first lot at 590 or even better. Suggested stop on close at 560 (if this is possible for you: suggested intra-day stop at b/e).

06/01 It was possible to cash in the second lot at 615; suggested stop on close now at 590.

06/02 Suggested stop on close at 610.

06/03 Suggested cashing in the last lot at the Monday open.

06/06 Out at around 640.

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 read through Joe Ross' free powerpoint presentation: Spread Trading - A Whole New Way to Trade.

Andy's Trading Article

Student's Question: Hi Andy, the last few months have been very tough in regards to my spread trading. Is there a time of year when you think it is better not to trade spreads?

Unfortunately, spread trading (like any other way of trading) becomes flat or difficult from time to time, and there is not much you can do about it. I have not seen any “seasonality” in my spread trading so far, but there are times when spread trading becomes very tough for me. Good money management helps me to get through the difficult times.

What can you do when times get tough? Well, one thing you can do is reduce your risk by slowing down your trading until conditions get better again. Do the opposite when your trading is successful. It’s like driving a car ─ you cannot get from one location to another by driving at a constant velocity. You have to slow down when there is a lot of traffic, and you can go faster when the traffic becomes lighter. Try to do the same in your trading.

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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.

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• 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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