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Spread Scan Issue: February 18, 2009 - Volume 234
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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:
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.
This week we look at SBH0 – SBK9: long March '10 Sugar #11 and short May '09 Sugar #11 (ICE)
Today we consider a calendar Sugar #11 spread (ICE): long March '10 Sugar #11 and short May '09 Sugar #11 (SBH0 – SBK9). After falling like a rock in January, it seems the spread has found resistance at around 0.80. Because seasonality starts in a few weeks (03/13 – 04/13), I would suggest splitting up the position into two lots with an entry into the first lot at 0.90 and an entry into the second lot at 0.60 (if market is moving down. If not, we can add on higher); suggested final stop at 0.45.
Traders may want to enter the spread at 0.90 limit with the first lot. Initial margin is $280 (reduced). Suggested risk is $350. Basis is seasonal (3/13 – 4/13) and a possible bottom around 0.80.
On January 16 we told subscribers of our professional daily spreads & position trading newsletter Traders Notebook, "Consider entering an inter-exchange wheat spread (Globex) KWH9 – WH9 at a close above 26 ½. Initial margin is $1,175 (reduced). Suggested risk is $400. Initial projected objective is $400, then a move to 40 or higher. Basis is seasonal (1/7 – 2/27) and a 1-2-3 low."
Here's how we suggested managing this trade:
01/16 Suggest entering around the opening on Tuesday.
01/20 In at approx. 29. Suggested mental stop at 25.
01/30 Suggested mental stop at 27.
02/12 Suggest cashing in the first lot today if possible.
02/13 Spread hit suggested first target. Suggested mental stop at 33.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
It’s All About the Exits!
Student's Question: "Andy, I still don’t know at what time during the day I should place my order for my outright trades. Any recommendation?"
Andy: To tell you the truth, I am having the same problem. If you asked me two years ago, I would have told you to place the order only during the pit session. However, the volume has shifted a lot, and the overnight session in some markets has become liquid enough for trading. I personally don’t like to place my order during the overnight session mainly for two reasons: I am not around when my orders are being filled, and there is a lot of stop running. Even if we can use bracket orders or other automated strategies with all these new trading platforms, I prefer to be around whenever I receive my fills to make sure my target, and more importantly my stop orders, are in place.
I am afraid I cannot give you a general answer. It depends on where you live, what markets you trade, and the way you manage your trades. You should understand that you are not physically able to trade 24 hours, even if the markets are open overnight. You will miss good trades, but you will also avoid being stopped into a false breakout if you trade only during open outcry hours. All in all, l would advise your trying to find a way that’s comfortable for you and your way of trading.
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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.
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ABOUT ANDY JORDAN:
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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. 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 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 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 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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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!