Spread trading in Meta Trader - page 194
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leonid553:
December 30, 2011.===========
Before the trades are over, - right now there is a good opportunity for a profitable "holiday" buying of the Amer. Bonds spread until January 10:
BUY ZNH2 - SELL ZBH2 =1^1 (10 - 30 year bonds)
Here is a chart of the multi-year seasonal trends of this spread according to the MRCI website:
The estimated profit potential (see top window scale) is very good! Below is a plot of the movement of this spread by year for a more concrete assessment of the advisability of this seasonal entry!
However. I have already written more than once that to reduce risk and to make trading this spread more comfortable - I do not use the 1:1 exchange ratio, but take ZN-ZB = 3^2.
With this ratio the expected profit will be a little less, but the risk is also reduced to a great extent (in case of negative developments). That's why by "year" I have laid out the seasonal charts just for this ratio!
So, over the last 10 years from December 30 to January 10, the spread has shown this dynamic every year:
BUY ZNH2 - SELL ZBH2 = 3^2
The statistics are clearly in our favor! From December 30 till January 10 - only one year (2005) was losing, two years we were at our own level. And the remaining seven years had a profit from a modest +25 ticks in 2002 to an incredible +320 (!) ticks in 2009!
The current situation of the US bond spread ZNH2-ZBH2=3^2 is shown in the figure.
Please note that the size of 1 tick spread is approximately $32.00 (per 1 contract), so you need to correctly correlate the size of open positions with the size of the deposit:
(I entered BUY ZNH2 - SELL ZBH2 = 0.06^0.04 and am already in a tiny profit!)
Congratulations to those who took the recommendation and entered this spread!
At the moment the spread line is already approaching its average profitable seasonal potential! The total profit is already about +3.00000 ( +90 ticks ). ( I entered BUY ZNH2 - SELL ZBH2 = 0.06^0.04 and in USD total profit is about +60.00$)
I.e. at the moment the spread line is already approaching its average profitable seasonal potential! Therefore, I "take responsibility" for further spread movement and partially close my positions!
Good luck to all!
There is now a divergence in the prices of the precious metals silver and gold. A good opportunity for short-term buying of the spread is silver-gold with a size ratio of :
BUY SIH2 - SELL GCG2 = 1^2
Close positions - at the point of convergence (crossing) of price lines. Or when the spread line reaches the upper limit of the channel:
There is a divergence in the prices of silver and gold precious metals at the moment. A good opportunity for short-term buying of the spread is silver-gold with a size ratio of :
BUY SIH2 - SELL GCG2 = 1^2
Close positions - at the point of convergence (crossing) of price lines. Or when the spread line reaches the upper limit of the channel:
Closing the SI-GC=0.05^0.1 spread positions now with a small total profit. Could still hold (price lines didn't quite converge), but no time to follow the final convergence:
Good afternoon!
Having warmed up with whisky, I am writing. Recently decided to look for highly correlated instruments from the forex set, plus gold... Found, obviously I guess, AUSUSD and NZDUSD, on the days the correlation is about 0.97 or even more. But that's not enough for me!
Do you think it is possible to find even more correlated pairs? As the best reference I have found so far, I see calendar pairs of futures for one commodity, their correlation on the days reaches 0.99...
==========
For short-term trading, calendar spreads (different contracts of the same instrument) are not suitable. You should trade strictly on multi-year seasonal trends. For example, calendar sugar spread SBH2 - SBK2 ( March - May) seasonally declines from 3 to 13 of January.
That's why we sell this spread in this period - without any correlations! We hold positions until January 12-13 or until we reach a total profit of +50 pips:
For short-term trading, calendar spreads are not suitable. They should be traded based on multi-year seasonal trends. For example, the SBH2 - SBK2 (March-May) sugar calendar spread decreases seasonally from January 3 to January 13.
That's why we sell this spread in this period - without any correlations! We hold positions until January 12-13 or until reaching a total profit of +50 pips:
That's fine.
However it is
"calendar spreads are not suitable for short-term trading".
is debatable. Why do you think so, Leonid?
Because there is no point in entering a short-term trade because of a few pips profit. You can lose more on an asc-bid at the opening.
Although, if you work towards seasonality you can try short term! Experiment on the same sugar spread.
Better yet, take intermarket corn-wheat spreads (ZC-ZW), flour-oil spreads (ZM-ZL), Dax-fUTSI=1:3, etc. ...
Because there is no point in entering a short-term trade because of a few pips profit. You can lose more on an asc-bid at the opening.
Although, if you work towards seasonality you can try short term! Experiment on the same sugar spread.
Better yet, take intermarket corn-wheat spreads (ZC-ZW), flour-oil spreads (ZM-ZL), Dax-fUTSI=1:3 etc. ...
Copying my post yesterday from my thread on seasonal-commodity trading of a well-known dc forum:
====================
Another seasonal entry is scheduled for the soybean flour-oil spread:
ZMH2 - ZLH2 = 1:1
A graph of multi-year seasonal spread trends according to the MRCI website is shown in the figure. I have marked the January movements of this spread with arrows:
If we plot a more detailed averaged seasonal graph of this ZM-ZL spread, we see a curious pattern. From about January 8-10 the spread rises sharply, impulsively, where it is fixed until January 18:
It will be interesting to decompose this spread by year over the last few years. I'll do that now and a little later we'll see the yearly movements of the ZM-ZL spread for the January-month!
-------------------
Here is a chart of the annual movements of the ZMH2 - ZLH2 spread over the last 10 years from 7/8 January to 18 January:
Profit/loss is shown in ticks (pips) on the ZM soybean meal scale (1 tick = $6.00 per contract).
Only one season (2008) was a loss-making entry. One more season there was no profit, in all other seasons. All other years were closed profitably, from a modest +20 up to solid +250 (2009) ticks (points) on the soybean meal ZM scale!
Since the seasonal date of entry to buy spreads falls on a weekend, we can open positions right now (or on Monday) :
buy ZMH2 - sell ZLH2 =1^1