trading the spread requires similar skills as trading spot in terms of analyzing the market fundamentally and/or technically. Yet, a significant difference is the burden on timing skills. The spot trader has to be very adept at timing entries and exits as the risk of being stopped out looms large. In contrast to spot trading, there is no sudden stop loss risk in the duration of the spread trade. Your risk is limited to the parameters of the spread. Because the spread trade expires at a defined intraday time, any price movement â below the floor for buyers or above the ceiling for sellers â is irrelevant and will not trigger a loss. The trader cannot be stopped out, so you maintain your opportunity for profit even if those parameters are breached prior to expiration.
how well I am finding all these things out. Man, I wish I had met you when I was a young man. otherwise, exactly what you said
well, it would be a little presumptuous to claim I've made any progress, but due to the overwhelming response in my PM (BTW I don't PM) box I thought I ought to update you. It all started with a lucky trade that all involed AUD, namely short EUR/AUD which just kept going like the energizer bunny. So the spread now is short AUD/CAD short AUD/CHF long AUD/JPY long AUD/USD (USD is really hard to read right now and I don't want to be long or short so I am always looking to get neutral) Short EUR/AUD and long GBP/AUD at six positions the proper size is about 4 to 1 it's just a matter of working the spread. At first it involed the usual. Adding to winners, adding to losers and taking the other side. The only progresss I have to report is I have elimintaed the "taking the other side" parameter. So basically, I am a perma bear on EUR, JPY and USD until something changes. otherwise, everything is controlled by size.
at anyrate, once you're comfortable with the spread, you are able to endure just massive losses on one leg, which if you were trading outright would have made you throw up and put the gun to your head.
I don't get it. All I have on is a minumum position which for me requires less than 4k in margin and I am up over 1k on the day. Now what do I do? There's really nothing to do but just look at and say, "That's nice." No point in adding because you know it can turn on you. No point in taking a profit because like I said all I have on is the minimum opening position. What am I gonna do other then take the profit and then just put on the same position. So now I'm right back where I started minus the spread and commissions (and on six pairs it can be almost 10%) I guess I could take the other side, but I was kind of trying to elimanate that parameter from the program, probably due to nothing more than the psyhcological damage incurred by whipsaw. well, thanks for listening, I guess I'll take the other side
no kidding man, I just took the other side, I'll let you know how it goes it wasn't part of the orginal plan