Euro$ Spreads

-oo0(GoldTrader)

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Euro$

Today we had a predicted seasonal June breakout in Euro$’s. Anyone who got in, in April is now up over 100% on this trade today. Below is an example of the original position before pyramiding. These numbers were taken from broker’s statements.

You can see the trade was placed in April. The margin was $338.00. One side is down ($600.00) the other up $1,250.00 for an open trade equity of +$650.00 almost 200% gain on margin. This margin has already been put to work pyramiding.

The thing with trading seasonal spreads, is that we had no way of knowing that Euro$’s were going to explode today. But as seasonal traders we knew that if each year we put on a Euro$ spread similar to this, just after taxes are paid, that usually around the beginning of June we would be taken for a ride, as has happened again this year.

We do not, as suggested by other well meaning spread teachers, get out after a few days when prices do not move. We put on a position and give the seasonal forces time to develop. We are waiting for general conditions to materialize and eventually show up in prices. When we see the stirring of some sighs of life, as we did here when Parobolic flipped long in May. This was the time to start a daily vigil.

We are not decreasing our position unless our goal is to pay our brokers mortgage. We did not jump out every time support was tested. We did not bet against seasonal forces working one more year again.

What we did do, was average up on the breakout of the eight-week high, just as we averaged up at the end of May expecting a June break. We may get out early but not two months early, as this seasonal has about six moore weeks to go.
 

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Yes. This is my problem.

I have looked at longer term trading before, but as my mind has been tuned to day trading, I get itchy fingers when ever a position goes against me - why I never made a good position trader.

What you say is true - about having discipline, patience and the courage of ones convictions. Excellent qualities for this style of trading, but somewhat deadly for a day trader!
 
No Discipline required

Hybrid Thread

You don’t need discipline, the numbers need discipline.
 
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Euro$ Spread season

The 2006 Euro$ Spread season is off to a great start. Jerry’s letter shows no drawdown, and Euro$ closed today on the high for the spread thus far. Ross gave us a heads up last month with a resting buy order above the current range. Stochastic shows weak bullish divergence. Parabolic has switched to a long position today. A breakout above today’s high signals the bottom is probably in. This area can be used to average up, increase or initiate new positions.

Historical exit points occur six, nine or about eighteen weeks into the trade if the seasonal holds. 60% of the move is expected 50% of the way in.
 

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Correction

First I would like to thank all the traders who noticed and wrote me about the screwed up trend lines on Stochastics. The bottom line was drawn on price (blue). Nothing wrong with that, but the next line up should have connected similar troughs on %K (red) or %D (green). Not the screwed up way the above chart was drawn, red trough, green trough, back to red.
 

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Euro$ entry filters

Good showing for technical analysis. The first Euro$ spread of the season did not break its downtrend line or sustain a bullish reading in Parabolic.

The market seems to be betting the next Fed boss, won’t be so tight. Whatever the bull, 15-year studies cover both increasing and decreasing interest rate markets. I just do not feel safe trading counter trend.

Except for three (3) days Parabolic has been short the recent “Euro$ seasonal spread,” for about seven (7) weeks. The downtrend line has held just about forever. Who would have thought the spread could stay below even money for any length of time.

The second Euro$ seasonal spread window, opens in about ten (10) days. Lets see what 2006 holds for interest rates.
 

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