Hi i'm looking into spreadtrading and i'd be really pleased if people with experience can give me some advice and insight. What software packages/websites are best for doing chart analysis of spreads and in particular backtesting - is this something that is done for non-seasonally based spread trading and if not, how do you know probabilities in order to assess your risk/reward and money management? (Obviously, if you are trading seasonals then you are probably best subscribing to a seasonals service rather than trying to chart yourself) I have looked at Nextrend, Barchart.com, Britefutures.com, TracknTrade (seems expensive for it's functionality), etc. and they only allow pretty basic charting of spreads, and no way whatsoever to efficiently and easy backtest a spread trading methodology. Has anyone else come across this problem and is so what did they do to overcome it? Advice will be much appreciated! Cheers Syn
Hi TraderTX thanks. I have looked at that in the past but not for spreads. I'll check it out. Cheers Syn
Hi Had a look at the site. Do you use it TX? It doesn't mention pricing and i was just wondering if you have any idea of the costs, data cost etc? Thanks Syn
Syn: I do use it, and I chart quite a few grain and meat spreads (inter and intra mkt) and also seasonals. It does a very good job on all of these, plus if you use a lot of tick charts (I use those too), it doesn't pull all that many resources. Price is very competitive compared to CQG....check your PM for what I'm paying. (didn't want to post an exact price in a public forum)
I have used CQG for 17 years now with spread trading - call me a creature of habit I suppose. There is a spread bar feature that models spreads exactly like flat price (ex., you could run 5 minute bars or candles with an RSI and MACD with a 1.6:1 ratio 5 year CBOT versus 10 year CBOT spread exactly like a 30 year CBOT bond chart). I have found that most spreads like certain technical studies much better than others, and that spread technical studies need particular tweaking to studies like oscillators for example that are unique to spreads as compared to flat price. As a side note, I am about 90% finished with the SpreadProfessor website and it will be hosted on Wild Apricot. Markets are slamming me - somehow I managed to trade 2000 Nymex contract turns (2000 buys and 2000 sells) just this past Friday alone.
Hi bone Thanks for the info, it's helpful in giving me an idea of its functionality. Re backtesting, can you give itthe parameters and will it run the tests for you or do you have to scroll back and manually backtest yourself? Do you strictly day trade spreads or do you swing trade too? I'm more interested in swing (and some position) trading of spreads. Really glad to here your website is nearing completion. Well done. I'll definitely want to check it out when you launch it. I remeber reading one of your posts about it some time ago, i think near that start of the project. Hope life's easier for you now than it was then. I trust you'll let us know when the website's live. Have you any idea when that will be? regards Syn
Hey Syn, good to hear from you again. I keep a core position on from a swing/position trading time horizon, but it is very small compared to the intraday high-frequency sizing. For example, over the weekend, I am carrying a 50x100x50 butterfly. The modeling I do for swing trading definitely forms a bias for the intraday high-frequency work. More on that in my website. Soon, Syn, soon. I would esimate that it's 90% done and will be hosted on Wild Apricot. While I do backtest both manually and via canned software functionality, to tell the God's honest truth I am much more concerned with correlation and statistical Z-Scores, seasonality, corporate earnings reports, and government/industry statistical releases (storage, supply/demand, employment, crop reports, that kind of thing).
Sounds very interesting. You can have standalone strategies, it's great to build a group of strategies that complement each other. It enables your trading to have true direction and focus, plus there's the shared learning and synergy to be gained too. Great. I can't wait. As i said i'm new to spreading, and clearly you're very experienced, but i know exactly where you are coming from. A little backtesting to confirm what TA is effective for providing extry/exit signals, momentum readings, assessing retracements, etc is all i'm really after. I know as i move towards spreadtrading the bulk of my work is going to be on the sort of stuff you've mentioned above. I'm currently considering the best way to start my spreadtrading, by assessing the size of the barriers to entry (e.g. market's characteristics, level of risk and margin requirements, and what this means for seed capital, total fees - fundamental and seasonal data needs, quotes, charting and TA, choice of broker, etc). I've yet to decide whether seasonals or other "relative strength" based spreadtrading is the best place to start. I have even considered beginning with some "relative strength" based pairstrading of etfs as a starting point. Although this then causes some problems on the charting and TA side.