I get many private IM's and emails about seasonals and spread trading. So I simply wanted to publicly state in a very brief post my own personal opinion about seasonal tendencies and spread trading in the energy, grains, and softs. There are many websites and mentors that promote the use of seasonal tendencies to "time" spread trade entries. It's no secret that of course commodities like energy distillates, the grains, and softs have strong seasonal tendencies that are reflected in spread pricing and are based primarily upon commercial expectations for future supply versus demand, as well as changes in physical basis and carry costs that can also be seasonal in nature. My position is that if a trader is going to use past historical seasonal tendencies to take a like position in the futures market, that the most prudent strategy for the individual speculator is to wait for price action to confirm your expectations before you actually take a live position in the market. It's better, IMHO, to give up some trading range in exchange for the knowledge that Commercials are in agreement with you. Conversely, if you are modeling and trading spreads based strictly off of price action, you are a seasonal trader who's fashionably late to the party - albeit an ignorant one in terms of the fundamental drivers moving that market. But in the end, ignorant systems traders can be highly profitable - as can a very astute fundamentalist. The downside to trading principally on fundamentals in terms of spreads, again in my own personal opinion, is that you are restricted to trading the markets that you are a subject matter expert in - and of course, price action traders have no such restrictions. Price traders model markets, take a position, and either get stopped out or their profit targets are reached.
My preference is to let a serious prospective client perform due diligence on me - including providing to that potential client email contacts of existing clients so that they can be independently contacted and queried about their experiences. YOR - can you please share with the rest of the people on this website, why you have only four posts in 2014 - and they all appear today trolling me ? Rachmaninov, I do trade my own account.
Fair points, but do you have any suggestions on how to quantify a potentially good seasonal from a not so good one other than developing a deep fundamental knowledge - which is difficult if trading several complexes as you point out. Maybe I'm over complicating the matter - and it is as simple as take the trade based on confirmation of the seasonal pattern? Either way I'd be grateful if the thread got back on track to trading seasonals! (and with out fanning the flames, I'm surprised our friend Ye Old Refco hasn't confirmed the credentials of Bone through his friends at Ye Old STA (who Bone states as customers) given Refco/Mac merged with STA. Bone & Troll must know some people in common) Yours, Long Time Lurker.
A good price action-based model will indeed pick up on seasonal tendencies and changes in fundamental drivers. You will be later to the party than the Commercials - but that's OK, because the object is to make money and not get your ass run over. The Commercials will do the heavy lifting in terms of changing or extending trend patterns - and your job as an individual speculator is to go with them. At least that's my take on things and that's what I teach my own clients. I know virtually nothing about Sugar and Coffee fundamentals - but they have been very good spread trades for us the past few years. Furthermore, there are many HF's and private equity groups that trade these electronic markets based strictly from price action. I have one client who is particularly good at trading Live Hogs versus Corn and he came to me as a Forex scalper of all things.
Interesting. Last time I looked at Ice spreads the margins were ridiculously high - they seem to have comeback to sensible levels, so I'll consider them again.
Last 5 years on Corn Sep. vs Dec. Spread The shaded area is the time of year that's touted as the best time to trade the spread.