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Spread
Scan Issue: May 16, 2007 - Volume 144
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Joe Ross Spread Trading Newsletter.Each week we present spread trading examples and opportunities in order to help you become a more professional spread trader.
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.
Today we consider an inter-market equity spread: long August 07 Feeder Cattle and short December 07 Live Cattle (500*FCQ7 – 400*LCZ7). The spread has been in a sideways market since April 07, trading between 17,900 and 16,700, and unable to break out of its trading range. Will a break out of the April high be the beginning of its seasonal up move?
Traders may want to enter the spread at a value of 18,070. Margin for the spread is $2,633 (no reduced margin). Suggested risk is $1,000. Initial projected objective is $1,000, then a move to $22k or higher. Basis is seasonal (app. 5/12 – 6/27) and a break out of a trading range. Because of the different values of each unit move of 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.
On April 22 we told subscribers of our professional daily spreads & position trading newsletter, Traders Notebook,"Consider entering an intra-market spread LHM7 – LHN7 MOC on 04/23. Margin for the spread is $675 (reduced margin). Suggested risk is $400. Initial projected objective is $400, then a move to 2.0 or higher. Basis is correlation (app. 4/15 – 5/10) and a 1-2-3 low. Comment: The spread broke out of its 1-2-3 low a few days ago, giving us the possibility of entering the trade. Please check with all your other meats spreads!"
Here's how we suggested managing this trade:
04/23 In?
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Questions or Comments? Please email us: support@spread-trading.com
Student's Question: "Andy, how much time do I need every day for spread trading?"
Andy: The trading itself doesn’t need much daily time. Approximately 10 – 20 minutes are required to check the charts each day, looking for new entries, checking your open positions, and giving your orders to the broker. Looking for the right trading opportunities needs much more time. Depending on the number of markets you want to trade, you will need several hours a week for your preparation. The most difficult part for a spread trader is finding the right trades out of hundreds of spread possibilities. Beginning traders find this part of spread trading especially difficult. Since you are a subscriber of "Traders Notebook," this part is much easier because I do the searching for you. But don’t think you have to take all the trade recommendations! You still have to select the trades that are right for you, the trades with “your name on them.” Those who don’t subscribe to a newsletter need to focus on only a few markets in the beginning, so that they don't get lost among all the spread possibilities.
Start your Trading Business on the Right FootLet me introduce a great online trading course you need to study for successfully operating your trading business in today's markets. Study it now, whether you are new to trading or an already seasoned trader.
The course "From the Beginning" has information for traders at all levels, from beginners all the way through to advanced. The course includes fundamental detailed information about this business that most traders do not know, and are unaware that they need to know.
IF YOU'RE LUCKY YOU MIGHT FIND THIS INFORMATION IN BOOKS, BUT you might have to read through thousands of pages to get it. However, in the e-book "From the Beginning," you will find the answers all in one place.
You can increase your chances for trading success when you know and understand the business of trading. The more you know, the better off you will be. You need to know the rules and the players; you need to know what can hurt you and what can help you.
Follow this link for more detailed information and to order YOUR COURSE "From the Beginning" NOW!
All the best to you and in your trading,
Joe Ross
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2007 by Trading Educators, Inc
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Disclaimer:
The Commodity Futures Trading Commission has asked us to advise you that trading spreads 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!