Futures spread trading

Quote from bone:

Just got this message from a client in London who has been scalping ES for several years and who hired me a few months ago to teach him how to spread trade - the original philosophy was that he would continue with his core ES strategy and swing trade futures spreads as an additional income stream:

"ES is totally untradeable... im thinking i might actually not go back to it even when the volatility settles.

Ive not been trading at all the last week after getting burnt last monday and realised i was going to start digging a hole if i carried on in these conditions.

you may now have a total convert ;-)"
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It is interesting that this is the second or third time that the markets have become extreme since I've been learning to trade spreads and for most of the spreads that I'm trading/watching the volatility is no different than periods of normal market volatility, at least on an end-of-day basis. Exceptions to this are obviously gold, currencies and the stock indices, they are making some very large moves in the last week or so. For an account my size the normal volatility in these spreads are a bit much anyway so my grains, energy and meat spreads are doing just fine.

These large moves make me want to plunge into an outright position in oil, NQ or GC, but I resist this impulse because the volatility of these markets could wipe me out in a day or two. So I stick with my spreads, I don't know if I can ever go back!
 
Quote from GiantHogweed:

It is interesting that this is the second or third time that the markets have become extreme since I've been learning to trade spreads and for most of the spreads that I'm trading/watching the volatility is no different than periods of normal market volatility, at least on an end-of-day basis. Exceptions to this are obviously gold, currencies and the stock indices, they are making some very large moves in the last week or so. For an account my size the normal volatility in these spreads are a bit much anyway so my grains, energy and meat spreads are doing just fine.

These large moves make me want to plunge into an outright position in oil, NQ or GC, but I resist this impulse because the volatility of these markets could wipe me out in a day or two. So I stick with my spreads, I don't know if I can ever go back!
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The equity based spreads I am familiar with have been more volatile, but not in a necessarily bad way. Volatility rather than divergence, largely.
 
Quote from GiantHogweed:

It is interesting that this is the second or third time that the markets have become extreme since I've been learning to trade spreads and for most of the spreads that I'm trading/watching the volatility is no different than periods of normal market volatility, at least on an end-of-day basis. Exceptions to this are obviously gold, currencies and the stock indices, they are making some very large moves in the last week or so. For an account my size the normal volatility in these spreads are a bit much anyway so my grains, energy and meat spreads are doing just fine.

These large moves make me want to plunge into an outright position in oil, NQ or GC, but I resist this impulse because the volatility of these markets could wipe me out in a day or two. So I stick with my spreads, I don't know if I can ever go back!
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I am trying to get my scalpers to be very selective when they are swing trading futures spreads - it can actually be quite a struggle. Overtrading is not necessarily a good thing, so I have this particular ES scalper using the TT Sim and keeping focused on managing the position. I have to demonstrate to him that he will be very profitable using a very modest amount of capital if he manages the trade properly. Managing the trade is where I have spent most of my time with him. He sent me this note last week:

"since 26th May Ive taken only 13 trades.

3 BE
2 losses
7 wins
1 trade still in play (ho u1:hoz1)

77.78% win rate.

compare this to my ES trading where i take about 11 trades a day...lol... "
 
Quote from oldtime:

hogweed, what grain spreads do you trade?
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I follow the MRCI recommendations so the typical stuff, calendar spreads in C, W, S, SM and some intercommodity spreads including KW and crushes. I tried MW but the slippage was too much to bear :)

For example into this mornings USDA report I'm holding CH/U and SMU/BOU.
 
Quote from bone:

I am trying to get my scalpers to be very selective when they are swing trading futures spreads - it can actually be quite a struggle. Overtrading is not necessarily a good thing,
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I agree with swing trading you have to be selective and be patient, I am slowing getting better at this. Hence my attempt to develop a metric to slow me down or get me more aggressive (see my post a few pages back).
 
Quote from bone:

I am trying to get my scalpers to be very selective when they are swing trading futures spreads - it can actually be quite a struggle.
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Bone, how do you handle a situation with a spread like SX/CZ? If you use a 1:2 ratio this one is trading historically low.
 
Quote from GiantHogweed:

Bone, how do you handle a situation with a spread like SX/CZ? If you use a 1:2 ratio this one is trading historically low.
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I personally do not care for beans vs. corn. Ditto for bunds vs. tens, wti vs. brent. They have what I personally consider to be less than desireable characteristics for spread trades.
 
Quote from bone:

I personally do not care for beans vs. corn. Ditto for bunds vs. tens, wti vs. brent. They have what I personally consider to be less than desireable characteristics for spread trades.
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To pick the brain of the resident expert:

What do you look for as desirable characteristics? :cool:
 
Quote from murphmack:

To pick the brain of the resident expert:

What do you look for as desirable characteristics? :cool:
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Better cointegration characteristics and something more reliable than a pure divergence play.
 
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