Andy's Spread Trading Journal

Hi Andy! I had a question for you regarding the spread 625*BPH6 – 1250*JYH6. This seasonal spread is discussed at MRCI and it looks like a reasonable trade; however the volume is very low for both contracts. What do you think?

I personally would trade the electronic December 05 contracts because volume is very low in the March 06 contracts and then just roll into March 06 on 12/12 (this is when the currencies roll from December 05 into March 06). Commission is low in the electronic markets and the roll over is not a big deal.

Please keep in mind this tactic doesn’t work for all markets. An example would be the spread long May Wheat 06, short July Wheat 06. This is a old crop/new crop spread and the spread long March Wheat 06, short May Wheat 06 will probably move a lot different because it is a old crop/old crop spread.
 
Andy..
I see you started with a 20K account..
How do you determine the margin to equity for such accounts?
I assume you need to be more aggressive, and still mindful of your max risk per trade..

Thanks...
 
You are right. It is more difficult to trade a smaller account because you have to accept a higher risk. If you trade a $20k account and you are willing to take only up to 4% risk on each trade, you will probably not find many trades.

The combination - starting with a small account and being new to trading - is very dangerous.

Small account means higher risk and higher risk means psychological problems and that is exactly what you do not need when you start with trading.

I ALWAYS recommend to start with paper trading. Even if it wont help on the long run it will help on the beginning. If you are not able to make money on the paper, how do you want to make money with real trading?

Then, I would only look out for low risk trades and I would only take one trade or max. 2 trades at the same time.

On the beginning it is not important to "make" much money, it is important "not to lose" too much money!

All the best...

Andy
 
Hi Andy! Today I received a really bad fill. Is there any way I can check if my fill was legitimate?

Andy's repy: All you can do is to check the outrights to see if your fills are in the right range. In any case, let your broker know the moment you think there is something wrong, definitely ON THE SAME DAY! Your broker can check times and sales for you. He can talk to the guys on the floor. He can check your order ticket. But you really have to tell him right away! The guys on the pits are gone fast after the close.
 
Hi Guys,

I hope you don't mind when I am posting spread trading related questions I receive from other traders. I know, spread trading is a bit different as outright futures trading, and I think these FAQs are informative for each new spread trader.

Happy Thanksgiving...
Andy
 
Trades

I got out of my LH-LH spread on Friday at 2.4 after my stop got hit.

Hyp. profit is $960 - $180 commission = $780.

I also took some profits with 2 contracts out of my US-TY spread today at 5^00.

I am still in W-W with a stop now at -19 3/4.

Have all a nice weekend,

Andy Jordan
 
Trades

I entered the following spreads n 11/24.

2 x FCF7 - LCG7 (charting the spread as 500*FCF7 - 400*LCG7) @ $13,115 with a risk of $1,200/spread. I took already profits today 11/29 of one contract @ $13,725 after the spread opened up nicely with a gap.

8 x LHJ7 - LHG7 also on 11/24 (one day after I got out of the spread) at 2.4 with a risk of $330. I took already profits today at 2.9 with 4 contracts.

I am still in W-W. My stop got hit on 11/27 at -19 3/4 but because I exit MOC the next day I stayed in the trade after a nice up move. Let's see if this was a good decission.

I am also still in US-TY with 2 contracts. Stop now at 4^25.

Happy trading,
Andy Jordan
 
Hi Andy! What do you think is the most important factor to become a successful spread trader?

There are probably many different factors involved in becoming a good trader or spread trader, but I personally think discipline makes all the difference. When I look at my trading journal, I can see that my trade selection is good. Nothing to complain about there. But from time to time I can see some notes like “I exited the trade because I thought the market will not go higher” or “I did not exit the trade fast enough." Do you find the same notes in your trading journal? I am sure we all can find them. We have to find out our weakness when we trade, and we have to find a work-around or a way to get rid of it. This is probably the most difficult part of trading.
 
Andy...
Do your stops work intraday?
Or do you place them after the close if the market has moved beyond your stop limit..
ex. you are long a spread at X with a stop placed on a market close ABOVE X+1. Market closes at X+2, so the next day, you place your order to get out.
Is this the case?
And if so, do you ever try to get cute and leg out to try to make back some losses?
Do you just exit at the open??

Cheers..
 
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