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 WZ1 - CZ1: long December 2011 Wheat and short December 2011 Corn Today we consider an inter-market spread in the grains: long December 2011 Wheat and short December 2011 Corn (WZ1 - CZ1). After trading sideways during April and May, the spread fell around $8,000 during the month of June. Seasonality usually changes from the downside to the upside during June, and shows a strong uptrend intol August (see the blue line on the chart). Aggressive traders might use a close above the #2 of the current 1-2-3 low as an entry signal, with a stop below the #1 at approx. 30. Because of the current volatility of Wheat and Corn, this spread is considered a high risk spread.

Previous Trades

On June 4 we told subscribers of our professional daily spreads & position/swing trading newsletter, Traders Notebook, "Consider selling the 3.50 Natural Gas October Put at around $750 limit (day order). Suggested risk is $750; suggest buying back the call for approx. $150, or exiting whenever the premium doubles (stop loss). Comment: NG went down a lot yesterday, but the long term up trend is still ok, and seasonality is still pointing to the up side."

Here's how we suggested managing this trade:

05/06 It was possible to sell the put at $750. Suggest buying back the put for $150.

06/02 We are at the top of the current range; suggest buying back the put for $250 tomorrow if possible.

06/06 It was possible to buy back the put at approx. 0.025 ($250).

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: Andy, is it dangerous to take trades in related markets at the same time?

Yes and no! As long as you know the markets are related, and you know what can happen if something goes wrong, everything is fine. The problem is when you don’t understand the relationship of your spreads. Very often the relationship is easy to see. For example, you are in FC-LC, and now you see a new trading opportunity in FC-FC. It is obvious the spreads are related to each other.

But what about W-W and C-C? Or even more difficult to see, the relationship between Feeder Cattle and Corn? Unfortunately, I am not able to give you a general answer. All you can do is look at the charts. Find out how strongly they are related, and try to imagine what would happen if one of the markets went crazy. Example: Imagine you are in the spread A – B, and you are thinking about entering X – Y. Now all you have to do is to think about what would happen to X – Y if A falls like a rock. Or, what would happen if B rises to the moon? Do this for each contract of all of your spreads, and try to find out how it would affect all of your open positions, as well as the ones you would like to enter.

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The Equity Evaluator™ lets you see exactly how well you are doing in the markets. But it does even more than that. The Equity Evaluator tells you when you need to stop trading long enough to take a serious look at your Life Index. It tells you when you need to paper trade, and it tells you when it's okay to trade with real money. The Life Index for Traders (LIFT) and the Equity Evaluator™ work hand-in-hand to ensure your trading success. These are Joe's two favorite management tools, and he credits these two tools with his ability to master self-discipline as a trader. Joe really wants you to have them both – please follow this link to learn more about the Life Index for Traders™ and Equity Evaluator™

SOCIAL NETWORKING WITH ANDY JORDAN

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There is no "one" way to trade correctly. Trading is as individual in its nature as anything in this world can be. The only thing that is right is what works for you.

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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.

For information about Joe Ross and Trading Educators, please follow this link...

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Copyright 2011. Published by Trading Educators, Inc.
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