Can I use Technical Analysis on Future Spreads

Discussion in 'Technical Analysis' started by mrbochin23, Mar 11, 2010.

  1. I am trying to get into Futures spreads, and will like to know if the difference between two month let say buy front month on Oil and selling later month, would it apply to use technical analysis on the differential of this two months?.........

    Thanks in advance.
     
  2. anything that will be offered to you is going to be a complete wild guess. Say someone does MACD on Natural Gas, and then does MACD on Unleaded Gas. And that this somehow tells you about each one individually froma TA point of view. Assuming TA drives price activity, then how is it reasonable to assume that a number of traders are looking at the MACD of a spread between them, and this drives the price activity of this particular spread?

    Without serious backtesting/proof to see if this works, how is this anything other than an unsupported opinion? And why will it matter if other anonymous people assent to this idea?
     
  3. mrbochin, I have not tried to apply conventional TA on the spread delta itself, but I can say that doing real time mathematical analysis on the futures contract spreads would not be a waste of your time and can lead to profitable ideas.
     
  4. trading futures spreads is more of a fundamental and seasonal thing, I wouldn't use too much technical analysis on it, other than supports and resistances...
     
  5. bone

    bone ET Sponsor

    I have been trading spread differentials using technical analysis and statistical time series studies for going on eighteen years now. I have thirty clients, (many of whom are ET members) who also use my methodologies.

    Most technical analysis is useless for spread differentials, but some very specific studies and derivatives thereof (studies on studies) have been of enormous benefit.

    To me at least, good technicals compliment the fundamental and seasonal drivers and expose them early to the trader - energy cracks and grain spreads being a case in point. I would estimate that 75% of my clients trade the Heating Oil and RBOB Gasoline cracks, and we are gearing up for the Soybean Crush and Grain Calendars.
     
  6. Pita

    Pita

    of course it is working. Take seasonal, corellation and/or other fundamental studies to create an entry time window and then wait for a confirming chart signal/pattern to finally enter the spread. How otherwise would you be able to manage those trades effectively? Energies nevertheless are not the best sample to apply TA when trading spreads since they are very fast and volatile but other markets like grains, meats or financials can be nicely traded off the spread chart.
    Bear in mind that you have to analyse the spread and not its legs individually!