Hello, As an aspiring spread trader, I bought the "encyclopedia of commodity and financial spreads" from MRCI team and an other one from Courtney Smith. Both were good and I would like to thank JLaw for his advice because It greatly helped me understand the mechanics of spreads. However, the book from MRCI is from 2005 and I had the idea to do a "walk forward" test of their agricultural and meats spreads for 2006-2007-2008... The results were so bad that I only tested spreads beginning in Jan, Feb, Mar and Apr.It was enough...Something like 70% of losers and losers outstandingly bigger than winners... I know this book wasn't meant to be a trading system per se and that spreads must be chosen depending on current conditions, crops, demand ... but I still expected the list of spreads from the book to be just slightly positive as a whole... What happened in the past few years? Is it seasonality that didn't work or just MRCI's spreads? Thanks.
It's not only 2008 and meats were bad as well( I hope I didn't make any error/inverting while copying them from the book). I forgot to say I just tested spreads that had more than 90% profitable years in the book... Let's take 2 of them :- Buy Jun Hogs/Sell Oct Hogs from 02/17 to 03/10 - Buy April Live cattle/Sell Mar Feeders from 01/10 to 03/15 Both BIG losers... Watching my sheet, I almost ha ve only losers for meats ( but it's only spreads 'til april I know )
hmm...it may be I was fading a lot of MRCI's stuff then! lol...I just remember having my best times in meats over that time period. IMO though, as far as meats go, the fall months are the best time to trade them...late August through December. I do remember a few big losers from last year that I did fade...one was Feb/June hogs, which MRCI bought at near historical highs, and the other was just adjusting the date on a lumber spread. If you are looking at the Moore stuff, you definitely have to keep it in context with current price structure and historical values. That being said, I do like to look at their research, and have found it valuable on more than one occasion.
I don't discuss their work. They searched historical relationships in spreads, tested it and published it... It's fine. They quite made an exhaustive list of what seemed both logical in the seasonal/fundamental and profitable through backtests, which is great. But it's just weird to see some spreads in hogs that have performed in 100% of the previous 15 years being losers in the next 3 years... It just reminds me my backtesting years...Sometimes it's like you have to fade what really performed in the previous years...LOL