Trading spreads like outrights

Quote from bone:

The biggest piece of advice I could profer: do not fade spreads looking for mean reversion, also known in the equity pairs universe as convergence-for-difference. (CFD). Futures spreads feature heavy commercial order flow participation. Futures spreads trend very, very well. In many cases, better than the flat price future in terms of "noise" contaminating your entry signals.
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My trading system is based on breakouts with a fundamental bias. After several years of studying these markets I've learned that fading moves, while usually low risk, can lead to some serious drawdowns.

Also, for claritys sake, I'm planning on only trading CL calendar spreads. I realize that intercommodity spreads are much more volatile and carry almost as much risk as an outright. I lol'd really hard at the threads about the people wanting to spread cl/brent without knowing anything about futures or spreads.

I really appreciate the responses guys. I've been working hard on this and just want to make sure I do it right. I just do not want to lose to much money while I learn.
 
I have a monster client in the UK who does size WTI vs. Brent.

Personally, I can't stand the trade. I do not care for Bunds vs. US TY either. To me, they exhibit some ridiculous cointegration fangs and are just pure divergence trades from hell. In my mind, shitcan the slippage and just trade the flat price outright future.

I used to be primarily a fixed income spread trader, but have made really significant inroads with energy, grains, metals, and certain equity spread plays in the past several years.

Good technical models work great with spreads.
 
Quote from actionzip54:

Also, for claritys sake, I'm planning on only trading CL calendar spreads.
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OK, but as an informational sidenote, if you can trade a CL U1-Z1 spread, you can trade a GE Z1-Z2 spread, and you can trade a ZC U1-H2 spread.

Seriously.

There are about 1,000 combos you can trade if you can manage a CL calendar. Just an FYI.
 
Quote from bone:

I have a monster client in the UK who does size WTI vs. Brent.

Personally, I can't stand the trade.
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Its generally a punt on weekly stats, pipeline volume and several other factors. My clients use it because they ship crude bought on a brent basis from persian gulf or NW Europe, and sell it on a WTI basis in the US Gulf or elsewhere on the east coast. Its actually a hedge for them.

If you get involved in inter-commodity spreads, as opposed to intra-commodity spreads, consider box strategies - ie. selling the Nov arb and buying the dec arb against it. That way if you get the move you expect you can still collect from the front contract, but if it goes against you the back one hedges you. It also limits your profits though as it's obviously a hedge. Also, you'll pay bro on 4x legs as opposed to just 2x.
 
Also, how long does it take to get a fill on these spreads? I've been messing around with lind waldock's paper trader and I seem to never get a fill. I'm assuming that is because its just not programmed to take spread trades even though it lets you make a spread order?

I plan on opening an account with IB too.
 
Quote from bone:I used to be primarily a fixed income spread trader, but have made really significant inroads with energy, grains, metals, and certain equity spread plays in the past several years.
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What kind of spreads are you working in metals? Platinum/Gold type or Gold calendar, etc?
 
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