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Spread Scan Issue: November 12, 2008 - Volume 220
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Otherwise, 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.
In this newsletter you will see applications of spreading in the futures and commodity markets. Spreads are applicable to all futures markets including currencies, commodities, financial instruments, and stock indexes. It is even possible to trade spreads in the all-electronic intraday market using day trading techniques.
Spreads are based on seasonality, correlation, backwardation, chart patterns, and simple observation. Spreads follow the Law of Charts™ and can be implemented using the Traders Trick™ entry.
In each issue of Spread Scan, you will find an upcoming spread trade for your consideration in the following week. You will also find a review of an existing or closed spread so you can see and learn how spread trades are managed.
Spreads offer you the most efficient use of your margin account of any other way to trade. Many traders find they like them so much that spreading becomes their primary way of trading.
Each week we present spread trading examples and opportunities to help you become a more professional spread trader, and we provide you with helpful content of interest to traders:
- Andy Jordan's Trading Bites
- Find your way through the vast Labyrinth of Trading Knowledge
- Next Joe Ross Live Chats for Traders: Wednesday, November 12, 2008
- About Joe Ross and Andy Jordan
- TE TRADERS FORUM
- Contact Us
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.
Andy Jordan's Spread
Scan Example:
This week we look at RBZ8 – RBF9: long December '08 RBOB Gasoline and short January '09 RBOB Gasoline (NYMEX).
Today we consider a RBOB Gasoline calendar spread (NYMEX): long December '08 RBOB Gasoline and short January '09 RBOB Gasoline (RBZ8 – RBF9). After breaking out of the low of -2.70 in October (also the July low), the spread fell down to almost -4.0, a low that had been reached only two times in the last 20 years (in 2005 and 2006). There is a small seasonal time frame going from 11/07 until 11/18 with a good chance to move the spread higher again. 4.0 seems to be a good level for an initial stop.
Traders may want to enter the spread at a close above -3.35. Initial margin is $200 (reduced). Suggested risk is $300. Initial projected objective is $300, then a move to -1.60 or higher. Basis is seasonal (11/7 – 11/18) and a 1-2-3 low.
On November 9 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider buying the December Natural Gas (NYBOT) at 6.970 stop market (all sessions, no entry on a gap open). Suggested stop at 6.719 ($2,500). Suggested first target at 7.220, then a move higher. Basis is a TTE in front of a hook."
Here's how we suggested managing this trade:
11/10 Long at 6.970 (with some slippage). Trade hit suggested target. Suggested stop at break even.
For more information about our daily newsletter, visit our Spread Website to find out more about Traders Notebook
Questions or Comments? Please email us: support@spread-trading.com
Student's Question: "Andy, nowadays almost all markets are electronic. Do you use the electronic or the open outcry market when you trade spreads, and how do you enter/exit your spread trades?"Andy: I mainly use electronic markets when I trade spreads. There are only a few markets in which the volume in the pit contract is higher than in the electronic market. The meats at the CME are one such market. But as long as the volume is higher in the electronic market, I prefer the electronic market over the open outcry. There are several advantages in using electronic markets:
- You have constant information about the bid and ask price. In open outcry you very seldom get this information (and if you get it, you cannot be sure if it is correct).
- You get your fills immediately. It is just a matter of seconds till you get your fill confirmation. In some open outcry markets you sometimes wait up to an hour or even more before your fill is confirmed.
- Commission is much lower for the electronic markets.
- You don’t have to call your broker or trading desk to place your order. You can do everything online. (Please note – you have to be careful whenever you use the electronic platform, especially in the beginning. There is no one double-checking your orders.)
When trading spreads using the electronic contracts, I prefer to enter and exit my spread trades around the open or the close of the pit session. In the open outcry market, I used to give MOO (market on open) or MOC (market on close) orders because of good liquidity around the close. But this type of order doesn’t exist in electronic markets. Therefore, we have to “simulate” MOO or MOC orders by giving market orders around the open or the close.
Find your way through the vast Labyrinth of
Trading Knowledge - get the real facts
There is much information available nowadays on how to trade Futures; numerous books have been written and many websites designed to provide educational services for beginning traders who look for the right KNOW-HOW of trading.
But why waste time and money buying numerous resources when you can get a complete course - all in one place?Joe Ross offers YOU a TRADING STUDY COURSE
FROM THE BEGINNING...The Course is fully updated to today's markets and has information for traders at all levels, from beginners all the way through to advanced.
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 "From the Beginning" you will find the answers all in one place.
Whether you've been trading for years or are just a beginner, there is much basic detailed information about this business that most traders do not know, and are unaware that they need to know.
The course will give you the facts you need to make
important decisions.
Let us tell you more about it on our website....
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Gather up your questions and comments, and "meet" other traders on line. Joe Ross will answer everything he can - come and join either his U.S. Live Chat or his Euro Live Chat:
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Wednesday,
November 12, 2008
Wednesday,
November 19, 2008
Wednesday,
November 26, 2008
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you missed any Chats but want to be up-to-date
Next
Chats for November:
Wednesday,
November 12, 2008
Wednesday,
November 19, 2008
Wednesday,
November 26, 2008
We hope you will join us!
Here is where you login to Joe's Euro Chat
You can also view our saved weekly Chat Logs in case
you missed any Chats but want to be up-to-date.
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(TM), and has set new standards for low-risk trading with his concepts of The Law of Charts(TM) and the Traders Trick Entry(TM). 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 approaches to trading. 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 student, a successful trader, wrote: "Thanks again for your trust and patience...Joe is a fountain of knowledge...but it is his wisdom that really sets him apart." Joe Ross 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 an active and integral part of Trading Educators. He is the primary author and Editor-in-Chief of the company's newsletters: Chart Scan(TM), Spread Scan(TM) , Traders Money Club™ and Traders Notebook(TM). 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. Give them a way to earn while they learn, realizing that it takes time to develop a successful trader."
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...
ABOUT ANDY JORDAN:
Educator
for Spread Trading and
Editor of Traders Notebook & Spread Scan 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. 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 favorite. 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 a one-week online course in spread trading, "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 has developed a number of trading methods, among which are Andy's E-mini 40 and a T-Bond trading method. 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.
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If you are willing to share what works for you, then we welcome you. Your ideas may help someone else on their way to success. In turn, you may pick up an idea or piece of information that will help you to become a better trader.
Joe Ross has been trading the markets, virtually all of them, beginning well over 5 decades ago. He is now in his seventh decade of life, so he has the experiences of many years that he is willing to share, as he is already doing through his books, seminars and newsletters.
We hope you decide to join us in our forum to make your contributions as well.
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Disclaimer:
The Commodity Futures Trading Commission has asked us to advise you that trading spreads or outright futures 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!