Wednesday, February 09, 2011

Looking at Spreads

I’m revisiting “The complete Guide to Spread Trading” from Keith Schap to get some ideas about spreads, which make “sense” and I want to share this approach with you, by posting some long and midterm charts.





Kind of extreme move or Silver catching up with Gold in the last 12 months.


Gold / Palladium




Choppy, but as you can see on the long-term chart PL/GC is forming a bottom pattern/ higher low. A break above 450 confirms.


Corn / Wheat




Nice move yesterday and prices have reached the breakout level from 2010 when we went from 200 to 320 in a matter of weeks only to drop back as fast back to 165.


Might be worth watching for a few more days, if indeed we spike up again. Seasonality supports that idea.

Monday, February 07, 2011


In addition to my last post, this is how a live order looks like


I’m short WTI/COIL at 11.50, will add at 12.00 and cover at 11.05

Stopped into this spike 11.39
(we made that higher low at 11.30, so I placed a profit stop at 11.40, which triggered at 11.40 and executed at 11.39)



Btw: Here is the IB TWS screen showing the closed position


You can see, that I’m looking at the crack spread (HO-RB) as well, but I’m not sure, if I will trade it, as it has quite a huge Bid/Ask spread. Will need to watch during RTH, to see if it gets better.


Trailing stops suck…(often not)


Initial target hit (the lines are slightly off, as I set them on the bigger chart above)

Spread Trading revisited

I wrote about trading spreads in the past: Tech spread, Spread Trading and concerning Forex here.

I recently started looking at spreads again and I think, it might interest you as well.

But first things first. I have a tick chart on my screen and sometimes I ask myself…Why can’t I trade the Tick


Simple, easy and always be right…

It’s obvious, why you can’t trade the Tick, but over the years IB came a long way concerning the ability to setup generic combo’s. You can go long one security/future/bond/option and short any other, as long as the underlying currency is the same. IB will then tell you to setup the ratio, so the value of the long and short leg match, calculate a trade price, display bid and ask prices, where you can actually place limit orders, stops or target orders, as if your combo where a regular traded instrument. It doesn’t matter, if that combo makes any sense at all, IB will calculate a price and you can trade it.


IB will even display a chart of that generic combo, something like this


That’s a Brent / Light Sweet Crude generic combo (Coil H1-IPE / WTI H1 IPE) chart. WTI is the same as CL, just traded on the IPE).

You can even use the IB Scaletrader to setup your orders for the day



The reason to trade such a combo intraday is simple. You look for something, which swings around a value, which displays an intraday behavior like the tick chart above. That oil combo is a bit more erratic, as it’s quite political right now with the Egyptian unrest and the spread being at extreme values in the “wrong” direction (Coil is the lesser oil quality compared to WTI, so the price should be below, not above WTI), but still it moves real nice intraday. Btw: As in CL one tick is 0.01 and that’s 10$ per tick, so that chart shows some real meaningful movement.

My next task will be to look for combos which move even more predictable, as I like in them, that all that bs, you see in the charts today, is not there.

I don’t care, if someone slams CL down or up, because it can only be done, if you slam not only CL but Coil as well, which means my combo is not affected, my signals work.

Sure you may be down 2000 in COIL and up 2200 in WTI per contract and one minute later you are down 500 in COIL and up just 750 in WTI, next you look its down 1600 in Coil and up 1900 in WTI and you decide to cover your position nicely up 300, without a sweat, while CL was swinging around wildly and I know, I wouldn’t have entered that contract straight, as I would have been whipsawed many times before covering a CL trade with a profit. That combo trade was no sweat, you can really trade what you see, and be reasonably safe, that no bigfoot will slam that signal.

PA works on these charts like a charm and I might even lose my long year companion Ensign over them, as Ensign is not really able to chart these combos. And… you don’t need fancy charts to see PA signals on this chart


Monday, January 10, 2011

Nothing to add…

It’s been quite a while, since I posted an article. The reason is very simple:

I’ve said, what I have to say.

And you can find my trade rules here:

There is nothing new, spectacular, which gives me instant access to these riches mentioned in all the emails I receive daily.

Looking through all the articles I’ve written, I ask myself one question:

Why am I no millionaire?

I know what to do, I have a system, I can trade … really?

The answer, why I’m no millionaire (yet), is quite simple and is actually the only argument I remembered from a trading book I recently read.

Why can you find more than 36,000 entries on weight loss at amazon,


when there is a very simple, always working method to lose weight (if you are overweight, of course):

  • eat less
  • do sports

36,000 books teaching you this simple concept!


Discipline .. traders have no discipline to follow some very simple rules

  • Have a system, which tells you what to do at any time (I got that one some time ago)
  • Take your stop loss or target, if hit (I struggle with that one from time to time, with disastrous consequences)
  • Stop, when you have made your daily, weekly or monthly goal (I failed that one completely)

I have started a daily workout in November (6 days on average with one rest day), I eat healthier and … surprise .. I’ve lost weight.

It’s slow going, it’s sometimes hard to motivate myself, but I feel better and already miss it, when I can’t do it … (I’m no gym guy, I like to exercise at home, when it fit’s in my daily routine. I got myself some Gilad DVD’s, as I like that Hawaiian background, when it’s freezing outside.)


I have adapted that same routine to my trading now. 


  • I have a weekly goal, which I can make with 3 winning days
  • I have a daily goal, which I can make with one or two winning trades.
  • I know the market I trade, as I trade just one instrument.
  • I stop trading after two losing trades.
  • I stop trading after two winning trades. Actually most days I do just one trade.
  • I’m usually done with trading 30 minutes after the open.


It’s my system. It works, so why mess with it.

And of course

… Discipline