Can you help me understand spread treading?

[Folio]

@Nobert You are surely right, I should study technical analysis and fundamental analysis. But I only have 24 hours a day and I gotta subtract the hours I sleep and the ones I am at work from that.

I bought an expensive course on spread treading, I studied it but I just don't get some points of it. It doesn't seem like a good idea to abandon it and go study something else. I'd prefer to finish this thing, trying it out a bit, and only later move to stocks or forex (as I suppose you're suggesting).

Not sure what you mean about double posting, I don't see any duplicates of my messages. Maybe it has to do with the fact that every message I write the forum tells me

"This message is awaiting moderator approval, and is invisible to normal visitors."

 

[Folio]

But my question is: how can I sell corn (blue) if I don't even own it yet?
I think you need to study the basics of trading futures. After that, you can come to trading calendar spread. Really this is the best way. Try to find in google/youtube "what is short position?" something like this.

But how is it possible to even have a spread if the lines are basically identical?
Lines are not identical, they have some range. Sometimes it is can be 1-3 ticks (movement of price). And basically this calendar spread has the same trend as his legs, but less volatile.

Good luck ; )

Thanks, I'll search that on youtube.

Can I ask you some questions about ticks? I think I understood them properly but when I simulate some calculations I get them ALL correct except for soybean oil.
All of them I get the proper result (gold, silver, wheat, corn, all of them), but with soybean oil, there's a mistake and I don't get it.

 

[Nobert]

"This message is awaiting moderator approval, and is invisible to normal visitors."

Oh, happens.

Anyways, before you can grasp the basics, you will have to spend at least 6 months in practice.
Make a lot of trades in simulations/demos, experiment with stuff/platforms.

Collect data in journal on what works and what not/compere, - make conclusions.
(i found a major discoveries in my personal data, after a year and thousands of simulated trades)

After a year or a two, you should start slowly with little amounts of real money.

That's my advice.

Time for coffee and a movie.

p.s
come back to the forum with questions all the time, will be worth it.

 

[jokertrader]

Can U repost your question on Soybean oil? Like what are the 2 months? What is long what is short? What did u expect to happen and what did u not see? So I/people can answer

 

[Folio]

Can U repost your question on Soybean oil? Like what are the 2 months? What is long what is short? What did u expect to happen and what did u not see? So I/people can answer

Here are some questions:

1. In commodities, a symbol is not expressed in dollars but in points. Those points must later be converted in dollars.

Any point is different, depending on the commodity and all points are divisible by a fraction, called "tick".

For example: 1 point of corn can be divided by 4 ticks of 0.0025. And, every tick of corn is worth 12.50 $.

Now I have been trying some simulations to check if I had understood the concept properly.

Let's see natural gas.

This is the table given in my course:

Here is the simulation for 1 point earned in natural gas:

They match. 1 point = 10,000 $

and I got it right, by doing 1 (the point earned), divided by the minimum tick, times the value for the minimum tick.

Therefore I did 1/0.001 x 10 and I get 10k $. It's correct.


Now if I apply the same exact process to soybean oil, this is the chart of my course:

this is the result the simulation gives

and as you can see they do NOT match.

If I apply my calculation, I get the same result of the simulation

1/0.0001 x 6 = 60k $

And I don't get why this is. I can sense that there is some detail that I am missing about the fact that 1 point is not 1$ but 1 cent of a dollar, and in fact 600 is 60k/100, but why on earth are these results not consistent?

 

[Stanislav]

Thanks, I'll search that on youtube.

Can I ask you some questions about ticks? I think I understood them properly but when I simulate some calculations I get them ALL correct except for soybean oil.
All of them I get the proper result (gold, silver, wheat, corn, all of them), but with soybean oil, there's a mistake and I don't get it.

You're right, it is a little bit complicated with tick value on Soybean Oil (I have experience to trade spread). My answer I simple: You need to find a trading platform which allows to trade futures calendar spread. They are expensive for beginners but has Free-trial so you can try it for study. Go to Trading Technologies web site and open DEMO account. Their platform had spread Price Ladder and you can easily see spread markets. Before open account for spread trading figure out if you brokers/platforms support spread trading it makes things a little bit easy.

If you are curious about spread trading > don't listen naysayers > Try it and decide by yourself what to trade.
Good luck ; )

 

[MichalTr]

Hey, thanks for your reply.

I understand your point of view, but I don't want you to just gift me all your knowledge.

The problem is that I bought a course (and I paid quite a lot for it) and it really goes into detail about how to use this strategy in the commodity field. The problem is that I don't get some things and I cannot ask the teacher so I need someone who's knowledgeable in this to clarify these doubts, otherwise all the course that I studied is in vain.


I have studied about the commodities, their symbols, the exchange of Chicago, the site of barchart, moore research.

The problem is that I didn't understand these key concepts (I have some problems with the understanding of ticks too) and without these key concepts it's all a mess.

Ok, but you should really start from basics.

And I don't want to disappoint you, but a lot of stuff you find, a lot of courses, especially those with high prices, it's mostly a garbage. A lot of ppl live and earn money selling courses, books etc. and those ppl usually can't trade. They are not able to make money from trading so theirs source of money is teaching and their source of money is getting money from ppl who want make money trading.

You can find a lot of free stuff in internet, you have also some forums (like here), where you of course also find a lot of crap, but you can also find a lot of useful things.

But it's your job to dig, to search, to read. Use google, use search button on this forum.

Questions you asked in your 1st post shows that you don't have basic knowladge. So it's even hard to answer your question. Because I can write "Yea, you have 2 main types of spreads (it will be simplification but it's ok for now) - intermarket and intramarket. It's based on outrights (let's focus on futures). Two or more legs. For grains both are nice. There are different margins etc. It will be also good to chart both ets and synthetics for spread you choose. Seasonality is nice in grains but it doesn't guarantee you that it will work same way. So only that is not enough." and more and more. But what happen next ? You ask me "what is intermarket, what is intramarket, what is outright, what is leg, what is synthetic, what is ets" etc.

So you defiantly need to do your job first.

 

[wrbtrader]

...Another thing is that I have read that you can invest in the same commodity, for example you can analyze the spread of corn future of September (blue) and the corn future of december (purple).

But how is it possible to even have a spread if the lines are basically identical?

Thanks to whoever replies.

The lines are not basically identical to the trained eye. If you can see the differences (inefficiencies) between the lines, bars or candles...

You can exploit the markets for consistent profits.

This forum has a sponsor by the user name @bone and he gets into about the differences and may be willing to share it with you although he's a vendor. His thread @ https://www.elitetrader.com/et/threads/spreadprofessor-light-package.317119/

Another option, there's books and a few free online articles about intramarket and intermarket analysis. They may be helpful too and at least get you to the point where you can see that the two lines (purple / blue) are in fact not identical.

Either one (intramarket or intermarket) analysis will keep you happily busy for many years.

By the way, there are quantitative models out there on spread trading (not spread betting) by some of the worlds top financial institutions...their quants are not sharing. Yet, I'm not suggesting you need to become a quant to learn / understand it...I'm just suggesting that its well worth learning it even from those like @bone that are not quants...I think he's not a quant.

By the way, as @MichalTr stated...knowing seasonality tendencies is not enough. I strongly believe that spreads can help you know and confirm when a tendency is showing up.

wrbtrader

 

[MichalTr]

Thank you for reply Michal,

to much to argue, if i go into deep on what you wrote, simply out of energy today & see no value in doing that, whatsoever.
Thus, 2 different world views, respect your knowledge tho.


Everything is alright with your English. Yes, i mean stocks.


For all of that a single question :
- how long so far ?


No. I didn't say that. What i said (am trying to say) that you should choose something else, instead of spread betting.


It's easy. When, you know both TA and FA. And have a right mindset/work ethic ready.
(those are 4 different fields in itself...)


You will hear all kinds of opinions, stay open minded, dwell upon all of them & come with your own conclusions, to find that -
which works best for you.

Not for me. Not for Michal.

But for you.

as i mentioned prior :


p.s you double posted, same text.

Of course one choses what suits him and focus on his field, which suits him the most and focus on what works for him, where he developed his edge. I also don't deny your approach (your approach is your approach) and I respect your knowledge too.

It's nice that among many trolls and frustrates (etc.) it's also possible here to exchange opinions/ posts with cultural people.

 

[MichalTr]

Hi Folio,
i am also a noob at trading, but when you say that comoditites must be traded by pair, like forex...... it sems not so right to me.......

i think people will answer you and you posted a well written thread so you will have more info.

Guys... you need to think. Each future contract in the world is in fact like you called it "pair". When you trading "pure" oil or "pure" gold, you are trading it against USD, or against EUR, or anything else. You still have pair...