Spread Trading - Strategy & Calculation

[mehtaka]

I plan to take a trade now... (Thursday Jan 6' 2011, 06.45 pm)

Short Lead 31st Jan Futs at 121.60
Long Zinc 31st Jan Futs at 111.50

Its on paper this time for me.
Am confident though that guys can enter real trades on these levels. Strictly these levels. I would strictly do my first couple of trades on paper before getting in the ring.

Lets see what happens.

Good luck.

Good luck....

Hope you saw my previous query...diffference in closing prices...

Also apart from this, what s/l u keep on it?

 

[sumeetsj]

Closing prices would differ if taken from different sources.

I tried downloading prices from a trade terminal and MCX, there was a difference. So i decided not to confuse myself over this petty stuff and use only MCX bhavcopy data.

Secondly the stop loss is subjective. As it is a spread the drawdown will be if the spread gap increases.
Hence trading on paper.
But looking at the past 6 months data and our calculations we should not be in negative for a long time. As it is the number of trades are very less. So i feel it will have a tendency to come to normal(adjustment of prices) very soon where we will make a profit.

On a lighter note: I will choose to square when i feel i have lost enough :lol:

 

[mehtaka]

oh thats grt...

good luck with the trade

also i think ders never a difference in datas, if you collect from anywhere...as it will be a case on whom to trust or not( except mcx, as he is the provider:lol

 

[balab]

Yes its just a theoretical reversal of position intraday. Obviously nobody can time it that perfectly (going long at absolute bottom and shorting at peak) but its to get an idea of max profit potential. I think the spread is going to increase some more... its started a bull trend and trends don't go away easily. Look at the number of gap widening days and gap reducing days for the spread in the past 60 days based on closing prices...there is usually a trend in there. Its been going up from a month now (7 Dec = 3.95)

Hi Mehataka,

The difference in data is because of calculations in excel upto some decimal places. Also the start of data range from which the Avg and Std Dev have been taken. I was also bugged initially when i compared. But after a lot of calculations found out these things.
Have studied your sheet as well. Its perfectly fine.

And in case of Balab's sheet is it some time where you have booked and taken reverse positions ?

Thats possible i think.

Also i feel its time to take a bull spread position. Maybe i will do a paper trade this time or jump only if the spread widens in todays trading session.

Pls comment.

Thanks.

 

[sumeetsj]

What i understand that in any type of trading one has to enter a trade. Once the trade is entered in bone and flesh then only one gets serious.
This is entirely my view though. Please exercise caution before entering any trades.

 

[rvaghani]

yes you can do it

 

[maigden_comm]

hello Iguru

its been an enriching experience so far reading all your posts and strategies..

I do have a query regarding the spread trading though..

Are all your trading been done on delivery base or intraday

2nd query is that once we know the closing price of the commodities and we calculate whether there will be bull trade or bear trade.. how do we manage to short or long the commodities at the same price as that of previous close as the next day the commodities normally dont open at the same price..

Please help.. thanks in advance

Manik

 

[sumeetsj]

hello Iguru

its been an enriching experience so far reading all your posts and strategies..

I do have a query regarding the spread trading though..

Are all your trading been done on delivery base or intraday

2nd query is that once we know the closing price of the commodities and we calculate whether there will be bull trade or bear trade.. how do we manage to short or long the commodities at the same price as that of previous close as the next day the commodities normally dont open at the same price..

Please help.. thanks in advance

Manik

1. Mostly they are delivery based. But if there is a good profit in intraday then why not take it.

2. For the purpose of back testing the closing prices were taken. But when next day the trades are actually taken then u can put the rates in the excel sheet and see before hand whether the current prices are allowing for a bull or a bear spread. Its dynamic as its difficult to get the same closing price the next trading day.

Seniors pls comment if i left out on anything..

 

[mehtaka]

Hi,
Sumeet has pointed out correct.
The other way you can do is to enterthe trade in the last half hr of the mkt.
Put the current rates in spread sheet, if spread is sufficient,enter the trade.
So,the nxt day ifmkts open up with a gap, who knows you may get your tgt der it self or atleast you are in trade.

 

[maigden_comm]

hey thanks for the useful details

yes I think entering in the last hr is a good strategy but in dat case it will be delivery based and that will result in 10 times more brokerage.. is the deal still good enuf or there is some other strategy where intraday is possible and hence lower brokerage

Thanks in advance
Manik