I have been trading spread for near a month. I have tried many different combinations e.g. DAX/Stoxx50, Stoxx50/emini SP, emini SP/Dow, Bund/T-Notes, QQQ/DIA, Gold/Silver ... The funny thing is all my trades were profitable!!!!!! But the trick is I DID NOT use stop loss. Those trades that were profitable I closed them before the end of the day. Some trades were very profitable e.g. the Bund/T-notes trade gave me 500 euro within an hour. Those trades that were not profitable I would wait. Even the worst case it would return to profitable within 3 or 4 days. I have been trading outright for few years, I am sure this method would never work. Many stocks or futures would never return to the entry price. But it seems in trading spread, it is OK to wait a few days without using stops. It seems too good to be true! Am I playing fire? I remember LTCM had something similar. Have anyone got any experience in this area?
We had a customer who was quite successful in real life but not so much in trading. He put on a hogs vs pork belly spread (I can't remember what side was long) based on someones reccomendation. This was before computers. So what happened, you would get a margin call, which was literally the broker called you in the morning and told you you had lost more money than was in your account. (or at least more than could cover maintenence) The broker and the client would discuss the matter and if the client could convince the broker that he was "good for it" the broker would cover. So the spread went the wrong way both ways. And after that, every month this otherwise successful man would come in and they'd close the door and talk about how much he could pay on his debt this month.
See the book , "What I Learned Losing A Million Dollars In Stock Market" This is book written by a trader who lost over a million trading spreads. Maybe Bone can speak more to this since he's the spread guru here. Funny thing is that he constantly refers to companies that engage in high frequency spread arbitrage as proof that his swing trading strategies make sense. That'd be kinda like a guy buying calls for a swing trade pointing out Timber Hill as evidence that his options strategies made sense. It makes no sense at all.