99% of chances u will lose trading spread. never met any commodity spread traders that have no knowledge on old/new crop months
Here is a liitle story. I like tellling trading stories. I used to trade on one of the smaller exchanges as a local. About 1991 or 1992 this new guy (Bill) shows up on the trading floor and starts trading. On the smaller exchanges everyone gets to know everyone else. Eventually Bill's story comes out except things don't add up. His trading style doesn't jive either. After being on the floor for about a year, I confront him and ask him if he is a plant (feds or what ever). The guy was gone the next day. He was in fact a plant by the feds, looking for money laundering or whatever. Actually saw him on a tv program several years ago when he was featured doing a drug sting. Cover was obviosly blown after that one. Anyways, bone, my point is that if you have doing this long enough you can read people. From your response re old crop/new crop grain spreads, I can't believe that you haven't figured that on out after 18 years of trading. That is one of the first things a trader should learn about grain spreads. Not suggesting you are with the feds by any means, but to call yourself the spread proffessor is comical. If you do have a legit business, could be a case of the blind leading the blind. Regards, local
Local, you're asking for ideas and input here with a thread that you started, but you are shooting holes and acting rude to those with meaningful contributions. What is it that you don't understand about taking a buy signal off of a technical model, and executing the trade in the electronic CBOT market? It shouldn't be that hard to understand. I have clients who got long Wheat Jul11-Dec11 on Monday, and I got long Corn Jul11-Dec11 last Wednesday. We are all up very good coin on the trades.
I can promise you that there are all kinds of prop traders, CTAs and PMs who are technical traders and consistent participants in the grain markets. I mean, Stevie Wonder could have seen this one coming.
That is how i spread trade. Old/New Crops. Like i said, i don't know how you spread trade without knowing the old/new months, carryover basis, storage costs, etc
"Like i said, i don't know how you spread trade without knowing the old/new months, carryover basis, storage costs, etc" By design, I don't trade "rich-cheap" for mean reversion based upon fundamental analysis - I don't like the risk/reward skew. I buy strength and sell weakness in the electronic screen markets based upon technical price action analysis. And it has been working quite well with the grain spreads, thank you very much. And it is fact that there are plenty of CTAs and PMs that do the same - trade flat price grains and grain spreads off of technical price action.
Sorry about that bone, don't mean to be rude,just that I've been at this for a long time and don't like being dissed (as my boy would say) by someone saying I don't know anything. Anyways have met all kinds of people including a lot of unscrupulous people in this business. For me, your posts signal a lot of red flags. 1) Just can't concieve that someone who has been trading spreads for 18 years can't define old/new crop corn. Absolutely no reason for it, whether you are a technical or fundamental trader. 2)Don't use risk reward ? Use only momentum ? Sounds like a crap shoot. Risk/reward and how it relates to carrying charges is what spreads are all about. 3)CTA use strategies similiar to yours, no wonder they don't make money. Guarantee that commercials absolutely, 100% use fundamentals when trading spreads. 4)You announce your sucessful trades after the fact. The sure sign of an amateur. eg. I started this post oct7, took you until today to state that you were onboard, yeah,right. Now, emg sounds like he knows what he is talking about, carry, storage and interest etc. Here is someone who could teach you a thing or two. Anyways, don't like to be negative but you don't appear to be on the up and up. Reagrds, local
Also worth mentioning that many commercial traders are basis only - they position their hedges opportunistically to take advantage of spread relationships. In times when markets are volatile and moving significantly...like now, the "spreads" are appear correlated with the spot due to the fact that more price action/volume/volatility is present near the front of the curve anyway. That pure technical whatever "model" works now because the spread is a proxy for the front month's action. Keep in mind also that the big guys were active in the back simply because they couldn't get exposure to the front when corn went limit up last week. During "normal" conditions its legit S&D, basis mkts, rates or a moron accountant in the corner office at C****** who doesn't know WTF a grain spread is and is demanding the stuff gets rolled. Nobody I know could use a model that doesn't incorporate these factors and be successful trading spreads. My 2c.