Get started

Spread

What is a Spread in Forex?Hello hello! In this post, we'll take a look at the basic principles behind the spread in forex market and why it is important. In the foreign exchange market, the spread is the difference between the bid price and the ask price for a particular currency pair. The bid price is the highest price that a market maker is willing to pay for a currency, while the ask price is the lowest price at which a market maker is willing to sell the same currency. The spread, therefore, represents the cost of trading a particular currency pair. When trading in the forex market, traders usually buy a currency at the ask price and then sell it at a higher bid price, hoping to make a profit. The spread is the difference between the two prices and it represents the trader's cost of trading that currency pair. The spread is usually expressed in pips, which is the smallest unit of price change in the forex market. For example, if the bid price for EUR/USD is 1.0735 and the ask price is 1.0740, the spread would be 5 pips. The size of the spread can vary depending on the currency pair being traded and the market conditions. Some currency pairs, such as the major pairs like EUR/USD, USD/JPY, and GBP/USD, tend to have relatively tight spreads, while others, such as the exotic pairs, can have wider spreads. Also, the spread can vary depending on the trading conditions, for instance, during high volatility period, such as economic news release, the spread tend to widen. In forex trading, traders should always be aware of the spread as it represents a cost of trading and it affects the trader's potential profits and losses. Spreads are usually factored into a trader's profit and loss calculations and it is important to consider the spread before opening a trade. Some brokers also offer variable spreads and fixed spreads, it is important to be aware of the difference between the two. Many online forex brokers now offer variable spreads, which means that the spread will change depending on the market conditions, but some brokers also offer fixed spreads, which means that the spread will remain the same regardless of market conditions.
Education
by m_maia14
ETH - Lesser of the Two Crypto BearsCrypto winter is here. Is this the darkest before dawn? Or the start of a long artic winter ahead? In such nebulous times, directional bets are rife with risks. In contrast, spread trades vastly lowers risk while enabling limited but durable returns. Set against the current macro backdrop and landscape shift in the industry, this case study will argue that Ether exhibits greater price resilience relative to Bitcoin prices. Accordingly, a long position in CME Micro Ether Futures combined with a short position in CME Micro Bitcoin Futures provides an opportunity to extract yield in a bearish market. Spread entry at 0.0721 with a target at 0.0793 delivers a reward to risk ratio of 1.88 with returns of $1,660. A stop loss of 0.0684 will limit losses from the spread trade to $880. A RESILIENT ETHER? Crypto winter plus recession fears in major economies will keep crypto prices subdued with continuing downside pressure. After a successful massive upgrade last year, the Ethereum blockchain reduced its carbon footprint. Next big enhancement is the Shanghai upgrade expected in March. This upgrade enables withdrawal of staked Ether representing ~13% of the entire supply. Staked Ether withdrawal will be gradual. Even though this might increase selling pressure, it will be less so relative to what Bitcoin faces as described below. GBTC LINKED BITCOIN SELLING PRESSURE Last November, Genesis (a major crypto lender) halted withdrawals citing a $1 billion shortfall. Genesis is looking to avoid bankruptcy filing. Its bankruptcy could spell contagion in crypto markets accelerating selling pressure. Genesis’ parent company Digital Currency Group ("DCG") operates the Grayscale Bitcoin Trust. Grayscale’s flagship product GBTC has suffered sharp sell-off resulting in a staggering 45% discount to NAV presently. Grayscale’s attempt to convert GBTC to a spot BTC ETF allows them to rebalance their holdings to narrow the discount. But their application to transform into an ETF has been denied by the SEC. Grayscale is appealing against the SEC’s decision in court with an outcome anticipated this quarter. If the ruling goes against them, Grayscale plans to offload up to 20% of GBTC shares leading to sales of 128,000 bitcoins which will send its prices tanking. BITCOIN MARKET CYCLES – WILL HISTORY REPEAT? PERHAPS NOT. Crypto winter is not new. Previous winter cycles of extended periods of subdued price action were followed by massive bull rally. Hope springs eternal but this time could be different. Bitcoin as an asset class will face recessionary environment for the first time ever. Unlike in 2018, long term holders (>1Y) have not moved their holdings this time around but hold massive losses on their portfolios down some 50% to 80% which could aggravate bitcoin downside pressures when selling begins. POOR FUNDAMENTALS BUT NEUTRAL TECHNICAL SIGNALS IN BITCOIN Bitcoin’s long-term moving average has served as a strong resistance and continues to be in a downtrend. Falling realised volatility points to a sideways market with limited liquidity and leverage. Declining market volume vindicates that. Orange Fibonacci retracement level which proved to be strong resistance also coincides with the pivot level P could be challenged once the Grayscale-SEC court ruling is out later this quarter. ETHER TECHNICALS POINT TO A SIDEWAYS MARKET DESPITE OUTPERFORMANCE OVER BITCOIN Ether has remained highly correlated with Bitcoin for the past two months. The long-term (100-day) moving average has served as a weak resistance as Ether broke through this level during November. The long-term moving average has become flat over the past two months in sharp contrast to a bearish one for Bitcoin. In the previous period of low HV (October to November), Ether outperformed Bitcoin by a stunning 22%. Stochastic for both Bitcoin and Ether point to oversold levels. OPTIONS MARKET FAVORS ETHER OVER BITCOIN Bitcoin has a put/call ratio of 2.5 on the CME in sharp distinction to Ether’s put/call ratio of only 0.8. On Deribit markets, put call for Ether is two-times lower relative to Bitcoin. Options traders clearly favor Ether over Bitcoin. TRADE SETUP A spread position of long CME Micro Ether Futures and short CME Micro Bitcoin futures. Spread trades require notional values of each leg to be equal. Each contract of CME Micro Ether Futures and CME Micro Bitcoin Futures both expiring in Feb 2023 provides exposure to 0.1 Ether ($120) and 0.1 Bitcoin ($1,665), respectively. Fourteen (14) lots of long positions in CME Micro Ether Futures will provide a notional value of $1,680 to offset one lot of CME Micro Bitcoin Futures which has notional $1,665. Entry: 0.0721 Target: 0.0793 Stop Loss: 0.0684 Reward/Risk Ratio: 1.88 Profit at Target: $1,660 Loss at Stop Loss: $880 MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. This material has been published for general education and circulation only. It does not offer or solicit to buy or sell and does not address specific investment or risk management objectives, financial situation, or particular needs of any person. Advice should be sought from a financial advisor regarding the suitability of any investment or risk management product before investing or adopting any investment or hedging strategies. Past performance is not indicative of future performance. All examples used in this workshop are hypothetical and are used for explanation purposes only. Contents in this material is not investment advice and/or may or may not be the results of actual market experience. Mint Finance does not endorse or shall not be liable for the content of information provided by third parties. Use of and/or reliance on such information is entirely at the reader’s own risk. These materials are not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Mint Finance to any registration or licensing requirement.
CME:ETH1!Long
by mintdotfinance
13
Gold to Outshine S&P 500 in 2023Fundamentals combined with its track record during recessions; Gold is set to outperform S&P 500 in 2023. S&P 500 faces uncertainty in the new year given higher rates for longer hurting both equities and bonds, nudging investors to alternative stores of value. Against that backdrop, this case study argues for a spread position of long Gold and short S&P 500 with an entry point at 0.466. BULLISH GOLD DRIVERS Falling Production : Gold production has been declining since 2019. Many gold miners have moved into battery metals and mineral resources. Miners have also reduced investments into exploration, making long-term supply anemic. Shrinking Reserves : Gold Reserves held by the top ten miners have shrunk by 33% over the last decade. Quality of remaining reserves is also deteriorating. Flight to Safety : Worsening global economic conditions has thrusted gold to emerge as a haven with flight to safety pushing gold demand up 28% this year as per World Economic Federation. Central Banks Buying Binge : Central banks are on gold buying spree not seen since 1967. Ratio of central bank buying to total gold purchases is at a ten (10) year record. Central banks of China (32 tons), Turkey (31.17 tons) and India (17.46 tons) are amassing gold at record pace. Impending US Recession : Recession fears are soaring. Although, Fed opines that the US could still narrowly miss a recession, the prospect of one seems likely. In recessions, gold has an impeccable track record of outperforming equities. Poly-crisis aggravates the urgency and flight to safety. During the last four Fed tightening cycles from 1994 to 2015, gold typically underperforms in the six-months preceding the rate hiking phase. Post that, Gold tends to outperform both US equities and USD. Higher Rates Devalues Equity and Bonds: When markets carry higher rates for longer, bonds and equities underperform. Investors with the classic 60-40 portfolios which are deeply underwater in 2022 will look to hedge with uncorrelated assets such as gold during recessions. KEY TAKEWAYS FROM COT AND OPTIONS MARKET Gold Net Longs Doubled : Over the last 12 weeks, institutional investors including hedge funds have substantially increased their net long positions in CME Gold Futures by 97.3%. S&P 500 Shorts Up +6.7% : During the same period, CME E-mini S&P 500 futures have seen institutional traders (including hedge funds) increase their short positions by 6.7%. S&P 500 Put-Call Ratio High : Ratio of number of puts to calls on US options exchanges touched 2.03x last week which is unprecedented since 2004. Typically averaging below 1, on one rare occasion has this ratio inched closer to 1.5x. Fear of a falling market is palpable. In other words, there are twice as many positions betting on US equity markets falling than rising. GOLD TECHNICALS Short-term moving average (20-day) recently intersected a falling Long-term moving average (200-day) suggesting a potential rally. Stochastic and RSI have moderated over the past week and appears neutral. Gold is testing its R1 pivot level. If R1 gets breached, gold prices will start testing R2. However, looking back since July, these levels have served as a strong resistance. Will this time be different? S&P TECHNICAL SIGNALS The S&P 500 is trading below its long term (200-day) moving average. S&P has failed to break past this level several times this year indicating stubborn resistance. S&P 500 also broke out of its ascending channel pointing to uptrend reversal. Currently trading above its S1 pivot support level, any breach of this support, could send S&P 500 down to S2 levels. TRADE SETUP A spread position of long CME Micro Gold Futures and short CME E-mini Micro S&P 500 futures. Spread contracts require notional value of each contract to be nearly equal. Each contract of micro gold futures provides exposure to 10 troy ounces of gold (~$18,280) while each contract of CME Micro E-mini S&P 500 futures provides exposure to $5 x S&P 500 (~$19,470), at current prices. Entry: 0.466 Target: 0.510 Stop Loss: 0.435 Reward/Risk Ratio: 1.15 Profit at Target: $1,562.75 Loss at Stop Loss: $1,356.63 MARKET DATA CME Real-time Market Data help identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. This material has been published for general education and circulation only. It does not offer or solicit to buy or sell and does not address specific investment or risk management objectives, financial situation, or particular needs of any person. Advice should be sought from a financial advisor regarding the suitability of any investment or risk management product before investing or adopting any investment or hedging strategies. Past performance is not indicative of the future performance. All examples used in this workshop are hypothetical and are used for explanation purposes only. Contents in this material is not investment advice and/or may or may not be the results of actual market experience. Mint Finance does not endorse or shall not be liable for the content of information provided by third parties. Use of and/or reliance on such information is entirely at the reader’s own risk. These materials are not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or
COMEX:GC2!Long
by mintdotfinance
5
Is the Santa Claus rally real?As we approach Christmas, for yet another year, we wonder if Santa is real, or rather if the Santa Claus Rally is real. Some hypotheses about the Santa Claus rally include the lowered Institutional liquidity as traders go on holiday (just like us, soon!). That leaves the retail crowd, proven to be bullish on just about anything, pushing markets higher. There have been many studies on this effect on the US markets with results ranging from slightly better than a coinflip chance to none at all. We thought to experiment with this idea and look at the same effect but on another market instead. With the massive benefit of hindsight, a simple, buy the Nikkei 225 in the middle of December and sell at the high/low before March comes around strategy, giving a win rate of 70% and an average win return of 10.3%, while the average loss was -11.3%. Interesting, but nothing much better than a coin toss with some variance. Now as a Trader, we always try to position ourselves in highly expected value situations and find a unique edge where others might not look. In this instance, how we can re-position ourselves is perhaps by looking at the spread between the US Index against the Japanese Index, before trying to identify the seasonal factor (Santa Claus Rally). But before we go further, it’s often good to think about how or why this trade might just work out: 1) Holiday impact – generally the Christmas holiday holds greater cultural importance in the US, hence it is likely that more will be on holiday in the US during this season. 2) Diverging monetary policies - The Bank of Japan remains one of the last central banks which stick to its negative interest rate policy (NIRP) even as inflation creeps higher. While the US Federal Reserve has led the world with its ultra-hawkish stance, raising its policy rates in a steadfast manner. The differences in monetary policies could nurture different directions for equities in respective markets, namely hawkish or tight conditions for the US vs dovish easing condition for the Japanese market. 3) Difference in accounting/Financial years – Differing accounting practices and book closure dates mean flows will differ for each market as institutional traders prepare to close their positions for their financial year. 4) Investors trying to front-run the January effect, where investors re-establish their positions after tax loss harvesting in December. These factors combined drive the Japanese and US markets differently, especially over this, year-end, holiday season. On to specifics, one way to look at the spread between the US and Japanese market could be to use the S&P500 Futures and Nikkei 225 Futures as proxy for the individual markets. Adjusting each Futures contract by the point value, $50 USD x S&P 500 Index point for the S&P500 Futures and $5 USD x Nikkei Stock Average for the Nikkei 225 Futures allows us to compare the two on a contract value/dollar for dollar basis. Applying the same, buy in the middle of December and sell before March strategy, gives a similar 60% win rate, but the average win now returns 71.4% while the average loss is -18.3%. A very rough back of the napkin expected value calculation gives this strategy a rough 35% expected return while the strategy on the Nikkei 225 alone returns roughly 4%. While one could try this strategy, we intend to provide a starting point to reflect on how we could creatively pair products to extract more value out of decades-old strategy. For example, on CME the listed Japanese Index Futures suite alone consists of products, such as the Dollar & Yen denominated Nikkei 225 (NIY/NKD) and Topix (TPY/TPD), all of which could be used to form variants of the above strategy. Something to think about as we head into the holiday season and prepare ourselves for an even better trading year ahead. And just like that, we are on our last piece for the year. We will be taking the rest of the year off and back in January with more! Merry Christmas and Happy Holidays everyone! The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Sources: www.jstor.org www.fool.com www.cmegroup.com www.cmegroup.com www.cmegroup.com www.cmegroup.com
CME_MINI:ES1!
by inspirante
15
2% Rule with CFDs versus Spread TradingThe rule is very easy to understand. Whether you trade using CFDs or Spread Betting, the rule is the same. Never risk more than 2% of your portfolio on any one trade. It’s one rule that you can use whether you have a R1,000 account or a R10,000,000 account. You see, trading is a forever business. This means, as a trader you should risk as little of your portfolio as possible in order to stay in the game longer. We’ll now go straight into how you to enter your CFDs and Spread Betting trades using the 2% rule. How to enter your CFD trade using the 2% Rule Here are the specifics for the trade CFD of the underlying Company: TIM Ltd CFDs Portfolio value: R100,000 2% Max risk per CFD trade: R2,000 Entry price: R400.00 Stop loss price: R380.00 To calculate the no. of CFDs you’ll buy per trade, you’ll need the: ~ Max risk per trade ~ Entry Price and ~ Stop loss price Next, you’ll need to follow two steps: Step #1: Calculate the risk in trade The ‘risk in trade’ is the price difference between where you enter and where your stop loss is: Risk in trade = (Entry price – Stop loss price) = (R400 – R380) = R20 Step #2: Calculate the no. of CFDs to buy No. of CFDs to buy = (2% Risk ÷ Risk in trade) = (R2,000 ÷ R20) = 100 CFDs In your platform you’ll type in 100 TIM CFDs to buy, place your entry price at R400 and your stop loss price at R380 to risk only 2% of your portfolio. Note: 1 CFD = 1 Share exposure 100 CFDs = 100 Shares exposure How to enter your Spread Trade using the 2% Rule With spread trading you trade on a ‘value per 1 point’ basis. You’ll choose either: R0.01, R0.10, R1 or any other amount per 1 cent movement in the underlying market. If you choose R0.10 value per 1 cent movement, for every 10 cents the market moves against or for you, you’ll lose or gain 100 cents (10 cents value per point X 10 cents movement). Here are the specifics for the spread trade. Contract of the underlying Company: TIM Ltd Portfolio value: R100,000 2% Max risk per Spread trade: 200,000c (R2,000) Entry price: 40,000c (R400.00) Stop loss price: 38,000c (R380.00) To calculate the ‘Value Per Point’ to enter your long (buy) trade, you’ll need the: ~ Max risk per trade ~ Entry Price ~ Stop loss price Next, you’ll need to follow two steps: Step #1: Calculate the risk in trade Risk in trade = (Entry price – Stop loss price) = (40,000c – R38,000c) = 2,000c (R20.00) Step #2: Value per 1 cent movement Value per 1 cent movement = (2% Risk ÷ Risk in trade) = (200,000c ÷ 2,000c) = 100c (R1.00) This means, with a ‘Value per point of 100c’ every 1 cent the TIM Ltd share price moves, you’ll make or lose 100 cents. Every 2,000c the market moves, you’ll make or lose 200,000c or R2,000 of your portfolio (100c Value per 1 cent movement X 2,000c movement). Note: 1 Cent per 1 cent movement = 1 Share exposure 100 Cents per 1 cent movement = 100 Shares exposure
JSE:J200Education
by Timonrosso
JICPT|HSI rebounded from bottom, yet to terminate the trendHello everyone. It's been a while since I published trade idea last time. Recently, Hong Kong market and mainland got my attention, not because I have exposure to those market, but the turning point is forming or was formed. There is no doubt that HSI is cheap. It didn't benefit too much from the QE policies implemented by central banks around the world. It surprisingly recorded losses for two consecutive years in 2020 and 2021 whilst peers soared into the sky. On the monthly chart, I drew an uptrend line which the index clearly penetrated. However, the zone with a range of 11355 to 13755 looked pretty solid. The possibility of closing below the zone is very very low. On the weekly chart, I added Hong Kong foreign reserve line. It is also clear that the correlation between the index and the reserve is positive. Fed hiked the rates aggressively this year. It cost HK government a lot of reserve to maintain its currency HKD against USD in the narrow range of 7.75 to 7.85. No wonder, the index dropped dramatically this year. However, things started to changed with news of no quarantine period required for cross-border travel to HK. In addition, the recent relaxed Covid-19 restrictions in mainland China also gave the market a boost. On the daily chart, we can see that the downtrend line is yet to be broken at the level around 20000. I'm expecting a battle between seller and buyers once it reaches the key level. In my view, the potential room to the downside is limited. HSI is really attractive for me to allocation some money to capture the upside move. What do you think? Give me a like if you're with me.
TVC:HSILong
by JICPT
1
It’s trading wheaty (pretty) high now...Continuing the topic of spreads between related commodities, the Hard Red Winter Wheat – Soft Red Winter Wheat spread is another one trading at an extreme level now. A brief explanation on the different types of wheat we are referring to here: 1) The Hard Red Winter Wheat (HRW) is the most widely grown class of wheat. A high protein product, used for breads, some types of Asian noodles and general-purpose flour. 2) The Soft Red Winter Wheat (SRW) is the third largest class of wheat variety grown in the US, lower protein wheat used in producing confectionary products such as cookies, crackers, and other bread products. Generally, the HRW Wheat Futures (KE) trades at a premium to the SRW Wheat Futures (ZW) due to the higher protein content, however other factors such as production levels and supply demand dynamics may disrupt this spread, as seen from the wide range it has been trading since 1977. Currently, this spread is trading close to 132 cents, with only one instance where it has traded higher, which was in March 2011 when this spread reached an all-time high of 164. We attribute the spread trading at a high now due to the following 2 reasons: 1) The 2022 HRW production is currently the lowest on record since 1963, due to widespread droughts across many of the HRW production regions. 2) The average protein content of the 2022 yield is higher than last year, as well as the average of the past 5 years, resulting in a higher quality crop. As a result, HRW is trading at a premium as supply shortage and a higher quality product pushes the price higher, while SRW sees average production and quality. While it is challenging to assess the production levels and quality for the next season, from a risk reward perspective, we see an opportunity here. The past few spread peaks have been clearly marked out by Relative Strength Index (RSI) pointing oversold. With the 10-year average for the spread at 6.3 cents and the RSI now oversold, we lean bearish on the spread. Referencing the average of the past 3 declines at 150 cents and lasting 511 days, we could set out trade levels. If the historical pattern holds this time, a conservative target of 120 cents and a trade length of 500 days points us to the 15-cent level. We see the current set-up as an opportunistic one, with similar episodes in the past pointing lower. CME also has the synthetic KC HRW Wheat-Wheat Intercommodity Spread, which can be used to express the same view and is financially settled. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Sources: www.uswheat.org www.cmegroup.com www.cmegroup.com www.usda.gov
CBOT:KE1!Education
by inspirante
14
Bull Bear Power Void - Your volume oscillator is lying to you.The simplicity of this indicator is REALLY what has me gassed up. It's the smallest indicator I have coded but it is just so powerful. There are a million oscillators out there based on volume. My biggest problem with them is that they simply tell you whether you have volume to the upside or volume to the down side. It kind of tricks you with the lack of information into thinking you have a change in your trend or that you're going to be able to break out of a range across a moving average or through some trend line or support and resistance. However many of these Oscillators are failing because they lack to tell you one key thing. They tell you that you have volume but they never tell you if it's enough volume. Even a popular indicator like the MACD can have its MACD Line crossing upwards over the signal, telling you that you have an uptrend but again it's still failing to give you the results of how much volume of trades you have and "is it enough" volume in that crossover. It boils down to the one key fact that without volume there is no momentum. This should be able to make trading crossovers a lot easier. So in today's video I'm going to show you the newest addition to the trading View Community Scripts and it is called, "The Bull Bear Void Volume Oscillator" Use this link to get it for free From my own testing, this oscillator can predict whether the next candle will get you the move you need or not. In the markets you cannot have anything good without volume. After you have volume you have momentum. You cannot have momentum without volume and this is the key thing that causes people to fail when they look for breakouts, trend reversals, or if they're wondering whether this move is a fake out. This indicator is based on the study of volume spread analysis or VSA. This indicator is designed to be paired perfectly with the Heiken Ashi Algo oscillator. Get it here This indicator is strictly to be used as a confirmation indicator and not to be used by itself to tell you when to buy or sell. What are its Parts? The Colored Columns or Volume Bars RED Column - Indicates volume movie downward Light Red - indicates volume is pulling back from a downward move Green - indicates volume is moving upwards Light Green - indicates volume is moving down from an outboard move The void Is Green for bullish and red for bearish. This is a Cloud that appears extending from the center upwards and downwards. This is the average range of volume. Anything volume closing inside of this void is ranging volume or very little volume and it is not enough to break the trend or break out. The MACD and MACD Signal Line Just like using the macd these two lines indicate whether the trend is moving up or the trend is moving down. But in this oscillator it's been colorized to show you when profits are being taken versus new positions being opened in either direction. Rules for a SELL CONFIRMATION TRADE The macd line must be underneath the signal line and the macd line must be below the midline. A bullish column must appear below the midline and it must extend outside of the red void. if you are using the heikin-ashi Aldo oscillator you must also have a red Heiken Ashi candle close below -10. The MACD trend line must be a solid color and NOT black. To open a LONG position you simply reverse the rules.
Education
by CoffeeshopCrypto
21
Crude Palm Oil’s underperformanceThis chart caught our attention recently. The Crude Palm Oil – Soybean Oil Spread (in USD per Metric Ton) is trading close to an all-time high now. This spells trading opportunity for us as Palm Oil and Soybean Oil are generally considered substitute products, which means, at a large enough price difference, buyers may hop over to buy the cheaper one. Eventually closing the price gap back to its historical mean. Further comparison of Palm Oil against its other substitute, the European Low Sulphur Gasoil Financial Futures, also shows the spread between these products near the high. A price comparison among the 3 products, Palm Oil, European low Sulphur Gasoil and Soybean Oil underscores this price disparity even clearer. The prices of the 3 products have generally trended together, up until July 2022 when Palm Oil started to underperform. Stepping back into the macro side, some potential tailwinds for Crude Palm Oil include; 1) The reopening of China, which would increase the demand for palm oil from the world’s 2nd largest importer of the product. 2) Biofuel Mandates, which would put higher demand pressure on Palm Oil. 3) Slowing production growth in palm oil could lead to supply-demand imbalances, pushing palm oil higher as supply falters. One way to trade this price divergence would be to short the Soybean Oil – Palm Oil spread. This trade can be set up by selling 1 Soybean Oil Futures and buying 1 USD Malaysian Crude Palm Oil Futures. However, do note that in such a set-up, the position is not fully ‘hedged’ as the contract units are different, 1 Soybean Oil Futures has a contract unit of 60,000 Pounds (~27.21 metric tons) while 1 Crude Palm Oil Futures is for 25 metric tons. Another option would be to trade the exchange listed Crude Palm Oil – European Low Sulphur Gasoil Spread (POG) which handles the construction of the spread and is financially settled, removing delivery risk. While it’s hard to ‘call’ the top, such price divergence provides interesting opportunities that we leverage if risk is managed properly. These trade set-ups allow us to express the view that Palm Oil’s underperformance will be closed, either by Palm oil catching up with its substitutes or if its substitutes fall in prices. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Sources www.cmegroup.com www.cmegroup.com jakartaglobe.id oec.world
CME:CPO1!Short
by inspirante
JICPT| US and Japan 10Y spread suggests where the pair go! Hello everyone. USDJPY has retreated from 152ish due to the intervention of Japanese government. In my view, the intervention may temporarily weighed on the pair, however, it won't prevent it go up further. The possible level it might go is 160. Why long USDJPY might become the best strategy of the year? Let's look at the left chart, containing two lines, with purple line for spread between US 10Y and Japan 10Y bond yield(risk free assets of the two countries ). It's clear to spot that USDJPY has a very strong positive correlation with the bond yield spread. Japan adopted loose monetary policy with rate at -0.1%. Whilst federal reserve aggressively tightened the rate several times. Big institutions can make easy money by following steps. Firstly, borrow Yen then convert to USD. Secondly, invest US dollar in the US treasury market to benefit from the spread. The first step is definitely put pressure on Yen. So, if you try to take short opportunities, take a hit-and-go strategy. The spread is expected to be higher because Federal reserve is likely to hike another 75bps in Nov. Don't go against trend. The entry level for bullish setup on the daily chart would be around 144 below the uptrend line marked on the chart. If the pair misses the zone and continues to create new highs, looking for pullback on 4H. What do you think? Give me a like if you're with me.
Long
by JICPT
2
Nasdaq’s past is a timely reminder.The Nasdaq 100 Index has had an incredible run, rewarding long-term investors with massive outperformance over the past 20 years. But as traders we want to position ourselves to benefit from short-term events as well. Look closer at the Nasdaq 100, S&P 500, and Russell 2000, you’ll find a similar setup to today, just 22 years prior, where the Nasdaq was trading incredibly rich compared to the S&P 500 and the Russell. We can also look at the ratio of the Nasdaq vs its peers to understand on a relative basis, how expensive or cheap the index is trading. Currently, both ratios still trade close to the 2000s high, a critical level where the ratio topped out and then crashed in a dramatic fashion thereafter. From a timing perspective, the Nasdaq 100/S&P 500 ratio took roughly 30 months to bottom out while the Nasdaq 100/Russell 2000 ratio took 27 months. With the current decline only 9 months young, we expect more pain for Nasdaq for quite a while longer. On a shorter timeframe, we see the 2 ratios near or at critical levels. The Nasdaq 100/S&P 500 ratio seems to have completed a double top, broken the neckline, and then come back to retest the neckline before being clearly rejected. This allows us to be comfortably bearish on the ratio. As for the Nasdaq 100/Russell 2000, the ratio is currently trading close to a major support level, the break of which will likely send it tumbling down. To set up this trade, we could: - Short 1 Nasdaq 100 Futures contract (NQZ2 Index) - Long 1 S&P 500 Futures (ESZ2 Index) However, this trade has certain risks as the dollar value effect of a 1-point move in the Nasdaq 100 ($20) is different from a 1-point move in the S&P500 ($50). Therefore, another way to set up this spread trade would be to: - Short 5 Nasdaq 100 Futures contract (NQZ2 Index) - Long 2 S&P 500 Futures (ESZ2 Index) Where the dollar value of the position is equal whether the Nasdaq or S&P moves by 1 point. Trading this spread would be eligible for a margin offset of up to 70%, meaning that the capital required to set up this trade is low. We think the Nasdaq’s past behavior might be back to haunt investors, hence we prefer to be on the short side, whether using the outright short or a spread to express our view. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Reference: www.cmegroup.com
TVC:NDQShort
by inspirante
4
What is Spread in Trading | Trading Basics 📚 Hey traders, It turned out that many newbie traders completely neglect spreads in their trading. In this post, we will discuss what is the market spread and how it can occasionally spoil a seemingly good trade. 💱No matter what financial instrument we trade, in order to buy the asset we need to have a counterpart that is willing to sell it to us and vice versa, if we want to sell the asset, we need to have someone to sell it to. The market provides a convenient exchange between buyers and sellers. The asset price is determined by a current supply and demand. However, even the most liquid markets have two prices: bid and ask. 🙋‍♂️Ask price represents the lowest price the market participants are willing to sell the asset to you, while 🙇‍♂️bid price shows the highest price the market participants are willing to buy the asset from you. Bid and ask price are almost never equal. The difference between them is called the spread. 📈The spread size depends on liquidity of the market. 📍Higher liquidity implies bigger trading volumes and greater number of market participants, making it easier for them to make an exchange. On such markets we see lower spreads. 📍From the other side, less liquid markets are categorized with low trading volumes, making it harder for the market participants to find a counterpart for the exchange. On such market, spreads are usually high. For example, current EURUSD price is 1.0249 / 1.0269. Bid price is 1.0249 - you open short position on that price. Ask price is 1.0269 - you open long position on that price. The spread is 2 pips. ❗️Spreads must always be considered in a calculation of a risk to reward ratio for the trade. For scalpers and day traders, higher than usual spread may spoil a seemingly good trade. Always check spreads before you open the trade. In 2020, for example, we saw unusually high spreads on Gold during UK/NY trading sessions. Spreads were so high that I did not manage to open a trade for a couple of days. Not considering spreads in such a situation would cost you a lot of money. Do you consider spread when you trade?🤓 ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Education
by VasilyTrader
3
Trade the Crude Oil and Natural Gas spread to limit price risk.Energy commodities are a volatile bunch. Amid a complex backdrop of the Russian-Ukraine conflict, a summer filled with heat waves and macroeconomic headlines, energy prices can swing in both directions quickly. From a risk management point of view, one way to maintain exposure in the energy market whilst limiting directional/market risk is to trade a spread between two energy commodities. We can measure the spread of the WTI Crude Oil (CL) vs Natural Gas (NG) by dividing the prices of CL1! / NG1! . This ratio/spread provides us with an overview of the long-term relationship between the two products. Over the past month, the pullback in WTI Crude Oil prices has presented an opportunity in the CL-NG spread. Generally, the spread exhibits a short/medium-term mean-reverting behavior and this behavior is premised on a few factors. 1) There is some level of substitutability between the two products as a form of fuel, therefore higher prices may drive consumers to use one over the other. 2) Most oil producers also produce natural gas, thus rising prices may incentivize them to drill for one product over the other. 3) Used as a form of relative value measurement for energy cost. When the spread trades at a high, we know that oil is likely trading rich relative to natural gas, and vice versa. Currently, the spread is sitting right above the 10.5 level which has acted as a resistance level since 2018, except for the oil price crash during the pandemic. Revisiting the past 3 times when this level was breached, a long CL and short NG strategy proved favorable as the spread rebounded. The average length taken for the spread to reach the high is 3-5 months. Should this relationship hold, we can long the spread by buying 1 WTI Crude Oil Sep 2022 future contract (CLU2022) and shorting 1 Henry Hub Natural Gas Sep 2022 future contract (NGU2022). However, do note that the contract value of the CL futures is ~ $97,000 while that of the NG futures is ~$80,000, so there is some exposure that is not fully hedged. Spread Entry at 12.30, stops at 10.50. Targets at 17.80. Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Reference: www.cmegroup.com
NYMEX:CL1!Long
by inspirante
1
Commitment of Traders Report from 19 to 26 July The CME report from Tuesday the 26th of July to Tuesday the 19th of July came out The reportable figures from the Dealers/Intermediaers (Exchanges/Brokers) and the Asset Managers/Insitutionals show negligible increases in Longs/Shorts BUT The SPREAD increase is nearly a 90% increase for said Exchanges/Brokers as well as a 62% increase in spreads for Asset Managers/Institutionals A simple way of understanding Spreads: A higher (wider) spread means there is a bigger difference between bid-ask (buy-sell) prices whereas a lower (more narrow) spread means there is a smaller difference between bid-ask (buy-sell) prices tighter spreads are a sign of greater liquidity, while wider bid-ask (buy-sell) spreads occur in less liquid or highly-volatile stocks Because of this - The current upwards move seems to be less volatile than the previous down move Theory - Exchanges and Institutions bet heavily on the current low volatility upside move
CME:BTC1!
by TrendmasterOfficial
Macroeconomic: Long Bonds/Stocks, Short GoldGold bug's biggest complaint is ALWAYS manipulation of Gold prices... Enter: exhibit 1. This is the spread between Bonds and Gold, and it has reached maturity and should reverse from here IMHO. With yields at 3%, banks will enter the bond market en masse, hedging that position with a short on Gold. With yields finally attractive, the US DX will also continue to rally which will be good for both bonds and stocks. For Gold, here you can see the EW justification for a return to lower levels as part of a 4th wave (before eventually making new highs). Then a zoom in on the current breakdown: I think a short position in Gold is justified, as well as long Stocks. The bottom in Bonds has not yet shown itself but could be any minute or day IMHO. I think the biggest risk to this macroeconomic analysis is that we will see a deflation across multiple assets as a result of rising rates, which will be apparent if stocks don’t rally and bonds continue lower.
CBOT:UB1!
by FuturesIntelTM
$STZ — Diagonal Calendar Put Spread?This price forecast is purely based on technical analysis of the current setup. I guess people are drinking a lot? We've had an extremely long stretch of green - which is a stale green light - 11 days in a row of green & 6 weeks straight of green - that hasn't happened since 2017 - it looks like the stock is trying to breakout on the weekly chart, but it looks so overbought technically speaking - very wide divergence from the all of the moving averages. This is a great candidate for a diagonal calendar put spread , or just naked put buys. I'm considering buying a very far out put - possibly January 2023 - and selling near-month puts against it with the goal of both having my bought put appreciate in value and have the sold near-month puts degrade in value so I can either buy them back for cheap or let them expire worthless. If I am able to successfully roll in near-month credits against my bought strike then I can slowly pay off the position's debit & eventually have a risk-free position. In other words, if I make enough money from selling puts - against the bought out of the money & far dated puts - then I can completely pay off the cost of the puts I bought while still owning them - creates a risk free position. Let me know if this is a confusing strategy for any of you, or if you disagree with my analysis.
NYSE:STZShort
by OptionsAddicts
IWM 184/179 Mar 4th Put SpreadTrade entered today based on my thinking that 1. This is our second green bar in a row, and I believe that either we have found a new range in the 190-200 range or we are headed back up. Which leads me to point number two 2. If we are in fact in a range then the 184 short strike is outside of that range and then some, providing a decent margin of error. 184 was also the 16 delta short strike at the time, and met the return metrics for the trade (10% return on margin required - AKA Max loss). The plan will remain with these trades to close at -200% or take profit at +50%. Fill on these was -0.57 on average after commissions. That is it, mechanical and S/R based. Sorry there isnt more secret sauce!
AMEX:IWMLong
by ThetaTrades
A Big Turning Point for USDCNHin the past few years, USDCNH usually found a turning point in the 1st Q, especially around the Chinese New Year. Today there is a big rally in USDCNH. Reuters report, FX conversion before the week-long Lunar New Year holiday, which starts on Jan. 31, has been traditionally heavier as exporters need to settle their dollar receipts for goods payments and employee bonuses, but markets widely expect some weakness could kick in soon. www.reuters.com Fed signal a rate hike in March and PBoC is going to keep monetary policy neutral to slightly loose, this will narrow the rate spread of these two currencies and favor more dollar strengthening. China's GDP will still have pressure this year as the Q4 GDP slowed to 4% in Q4 2021. The 20th National Congress of the Communist Party of China will be held in the second half of this year likely in Oct or Nov, the Chinese government will be busy with political issues. Will, there be any further pressure on the economy, we need to wait and see. a surge in USDCNH on 27 Jan 2022, should show a bottom of this pairs of currency and head for 6.5-6.65 in coming months.
Long
by bruceyam