I have tried spread trading for a few days. It is a new experience that is totally different from directional trading. I tried GBL/GBM (1:3) and ESTX/DAX (3:1) spreads. I only used market orders. 1. There are some times both legs are positive (very nice ) but some times both are negative (horrible ). 2. The spread ratio is rather subjective. For the GBL/GBM , some people said 1:4 other said 1:3 still other said 1:5. The ratio can greatly affect the result. 3. Still have the temptation to cut the profits short and let the losses run. I also tried to add to the profit leg but don't know it is good or not. Is it common for spread trading? Any comments are welcome.
how do you know when to enter? i'd think you'd be charting the ratios of the selected pairs and entering based on OB/OS signals.
If you're doing it by point and click you may as well just do outrights. Too many automated programs to compete with.
My basic tactic (2 SP futures contracts) is to bank profits when the index is trading in a range.Then use profit on one side to offset losses on the other on breakouts,rinse and repeat. You are only forced to take any loss on expiry.Less analysis,more money management.But good TA brings better entries/exits and maximises profit.This is relatively new to me and the vital thing is although you can allow yourself the luxury of averaging in,you must never allow your positions to get too large relative to account size.Other than that its a cash machine.
I also got the feeling that I can have the luxury to wait until the spread becomes profitable. I am only forced to take any loss on expiry. But is it a good practice?