Spread trading in Meta Trader - page 227
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Crudeoil/oil/gasoline pairing spreads are standard exchange spreads and they always trade at an equal ratio (1:1) in any of their pairing combinations.
(Although there are also triple-cracking spreads such as CL-XRB-HO=2^1^1(or 3:2:1), but they essentially have the same lot sizes. So that the size of one instrument is equal to the total size of the other two counter instruments).
What is the essence of the spread then? If CL is quoted at 85 and HO is 2.9530 let's say. I.e. is the spread obtained if one lot takes 85 - 2.9530 ?
What is the essence of the spread then? If CL is quoted at 85 and HO is 2.9530 let's say. I.e. it turns out the spread if you take one lot at 85 - 2.9530 ?
The essence of a spread position:"The most significant characteristic of spread positions is that absolute price movements are not important. Profits on one side of the spread are offset by losses on the other side. Only if the prices of the two contracts change relative to each other will there be a profit or a loss."
I.e. taken at 42,000 US gallons - see contract specification:
You have entered the intermarket spread.
Learn the basics!
"Spread trading consists of simultaneously taking short and long positions in different futures contracts for the same, or linked, commodity and is an operation in which profit is taken from the relative price movements of those contracts, i.e. it is very similar to arbitrage. However, unlike arbitrage positions, a spread position is risky, albeit to a much lesser extent than a straight futures position, because relative prices (or spread prices) are more stable than absolute prices.
The most significant characteristic of spread positions is that absolute price movements are not important. Profits on one side of the spread are offset by losses on the other. Only if the prices of the two contracts change relative to each other will there be a profit or loss.
Spread positions may be taken on futures contracts for different but related commodities, for different months of delivery of the same commodity, or for the same commodity but on different exchanges.
There are different types of spreads:
Intra-market spread:The simultaneous buying and selling of futures contracts for the same commodity but with different months of delivery. For example, long July corn is short December corn;
Intermarket spread: the simultaneous buying and selling of different but related commodities that have relatively stable price ratios. Examples of intermarket spreads are: wheat-corn or fuel oil-petrol spreads.
Inter-exchange spread: buying and selling the same commodity on different exchanges.For example, buying wheat on the Chicago Board of Trade (CBOT) and selling wheat on the Kansas City Board of Trade (KCBT);
Spread Trading is one of the most conservative forms of trading, and is much safer than trading direct futures positions.
This method of making profit has many advantages, especially for beginners: easy trading, stable seasonal trends, low risk and lower margin requirements.
In my opinion, it is the seasonal trends that are more compatible with spread trading than trading with a direct position, as they insulate the trader from the influence of non-market factors.
If you entered the financial markets seriously and for a long time, then you just need to learn how to trade with the spread. You can receive general information from the "Spread Trading" section , but you will get more in-depth knowledge at the distant workshop: "The theory and practice of spread trading".
Thanks. How do I measure the purchased spread? CL - HO.
Example contract specifications.
Energy carriers
Example contract specifications.
Energy carriers
Thank you. i.e. the spread will be
when buying 1 lot CL 85
when selling 1 lot HO 2.9530
Total spread : 85 - 42*2.9530 = -39.026 ?
Thank you. i.e. the amount of spread would be
when buying 1 lot CL 85
when sold 1 lot HO 2,9530
Total spread : 85 - 2.9530 = 82.047 ?
Looks like you are still at the very beginning of the food chain... :-)
No. Absolute values of instrument prices do not matter, IMPORTANT is their change relative to each other!
Read it SLOWLY and REasonably MANY times:
"The essence of the spread position:"The most essential characteristic of spread positions is that absolute price changes are of little importance. Profits on one side of the spread are compensated by losses on the other side. Only if the prices of the two contracts change relative to each other will there be a profit or a loss." - THINK ABOUT THAT!
And start learning the basics!
Thank you. i.e. the spread will be
when buying 1 lot CL 85
when selling 1 lot HO 2,9530
Total spread : 85 - 42*2.9530 = -39.026 ?
I.e. if you bought this spread (Buy CL - Sell HO) and the CL oil price rises faster than the HO fuel oil, the trading account will be PROFIT!
I.e. if you bought this spread (Buy CL - Sell HO) and the price of CL oil rises faster than HO fuel oil, the trading account will be PROFIT!
I understand that - I want to define the spread numerically. What should I put in MT?
Thank you. How can I measure the purchased spread? CL - HO.
- Go to http://www.spreadinvest.ru/index/0-49 (don't be lazy to register there) and see how spreads are calculated from different instruments (quote):
"However, what if the specifications of the contracts involved in the spread are different? Consider an example on the gold-silver spread: http://www.spreadinvest.ru/index/0-50 "(c)
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Actually, you don't have to do these calculations yourself - the spread indicator for mt4 - Spread_I_Env does it automatically and prints the formula in pale gray font on the left corner (see figure). In this indicator you only need to set the ratio of position sizes! (when EquityScale = true by default). Then the scale of the indicator will be set in dollars - in accordance with these dimensions, and according to this scale you can determine the movement of the spread in the currency of the deposit!
For example for silver-gold spread SI-GC=0.1^0.2 - spread channel width will be approximately $70:
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And for oil-fuel spread CL-HO=1:1 in MT4, just specify in the indicator (with EquityScale = true by default) the symbol names and ratio of sizes that you will trade (1:1 or 0.1:0.1 or 0.01:0.01) and the scale of the indicator will be given in dollars according to the given sizes.