Joe Ross Trading Seminar & Course

[al-motor]

dax-

that kind of things happen in options- if u write what is called a naked option, that is very likely- I understand thats what happened to uncle victor ( Neiderhoffer) in the S&P options............


Al

 

[MarketMaster]

We have further information that you can view from a recent article I wrote for Futures Magazine.

http://www.futuresmag.com/reprints/futures_spe_2003_p28_29_30.pdf

Joe, in the article, above, you state one of the advantages of spread trading is the increased return on margin:

"UNDERSTANDING ADVANTAGES
In August, the margin to trade an
outright futures position in soybeans is
$1,050, whereas an intramarket spread
trade in soybeans requires only $250, or
23% of the margin for an outright position.
If soybean futures move one full
point, that move is worth $50. If a soybean
spread moves one full point, that
move is worth $50. That means a five
point favorable move in either soybean
futures or a soybean spread earns the
trader $250. However, the difference in
return on margin is extraordinary. In
the futures, the return is $250 / $1,050
= 23.8%. For the spread, the return is
$250 / $250 = 100%."

Surely though, if there is a 5 point move in Soybean futures the spread will not have moved 5 points, in fact it may not have moved at all. The reason the margin for the spread position is lower than for the outright is because of the lower volatility. The margin requirements above suggest that a spread position has a quarter of the volatility of an outright position. It seems to me that a spread trade allows a trader to take a smaller trade, with less risk and (of course!) less profit potential, than if they took an outright position.

The next benefit is...

"This leads us to the next benefit of
spread trading, leverage. With the same
amount of margin, you could have traded
four soybean spreads instead of one
outright soybean futures. So, instead of
making $250 on a five-point move, you
could have made $1,000. Reduced margin
spreads offer a much more efficient
use of your margin money."

You could trade 4 spreads, but surely you would now have the same profit potential that one outright futures position would offer, but for a much bigger (8 times!) commission outlay?

Are you a broker?

 

[FTSE Beater]

Hi Marketmaster

Surely though, if there is a 5 point move in Soybean futures the spread will not have moved 5 points, in fact it may not have moved at all. The reason the margin for the spread position is lower than for the outright is because of the lower volatility. The margin requirements above suggest that a spread position has a quarter of the volatility of an outright position. It seems to me that a spread trade allows a trader to take a smaller trade, with less risk and (of course!) less profit potential, than if they took an outright position.

The main point is the reduced volatility that you highlighted. I see it as a safer trading method with longer trends

You could trade 4 spreads, but surely you would now have the same profit potential that one outright futures position would offer, but for a much bigger (8 times!) commission outlay?

Are you a broker?

LOL
If Joe is a broker, he is a very poor one - he recommends someone else :cheesy:

Yes you would still have the same position as an outright future, with one big difference. If you were trading soybeans, and the soybeans market went hay-wire (i.e. A sudden disaster) then both the soybeans contracts would rocket and practically cancel out the disaster effect, making it a lot safer to trade 4 spreads contracts than just 1 outright futures trade.

Yes you do pay more in commission, but I'm paying $8 a side, which I have no complaints about

HTH

 

[MarketMaster]

Ftse beater, my main point is that Joe is claiming that with spreads you get much reduced risk with the same level of profit potential, which is wrong and misleading. You get reduced risk with a proportionate reduction in profit potential. In other words you are taking a smaller trade, which is fine, but you do so at a high cost (the extra commissions). It makes better sense to trade a less volatile futures contract.

One of the biggest obstacle to profitable trading is the cost of trading, which is why spread betting is so disastrous for most people. It is easy to diminish the impact of costs when you focus on the possible profit of an individual trade.

My question about Joe being a broker was intended as irony as the advice to spread trade would benefit a broker the most!

Another post pointed out that the proprietary trading firms only trade spreads, which is (largely) true, but they are really arbing the spread rather than taking a view on the direction of the spread. In other words they are looking for (almost) risk free trades. (The risk with these trades comes in the execution rather than the call). These firms also have access to very low costs.

 

[Mayfly]

For those of you who’re interested, you’ll find a collection of some of Joe Ross’s trading ideas, together with a complete copy - chapter by chapter – of his trading manual in PDFormat here .

It should take about 30 mins to download and it sure beats waiting for the individual instalments.

Cheers

Mayfly

 

[jogy]

Mayfly, many thnx

 

[Trader333]

Malcom,

I am surprised to hear you say much of the above and leads me to ask the following question:

How do you determine the level of risk and potential reward on a potential trade prior to entry ?



Paul

 

[MarketMaster]

Hi Paul,

I can measure the risk by looking at where the market would have to trade for me to know I am wrong, I can't measure the potential profit, but my confidence in the trade will vary according to my reading of the market.

In the posts above I am pointing out that trading the spread between 2 contracts does hugely reduce the level of risk you take when putting on a trade, but that it also equally reduces the potential profit. This has nothing to do with the trade setup or exit, but with the volatility of the market.

If a market has an average daily range of 50 points, then the average daily range of the spread between 2 consecutive contracts might be 5 points. An outright position carries with it a greater potential for profit and and an equally greater potential for loss. A spread position carries a much smaller potential for profit and an equally smaller potential for loss. That is all, trading spreads is not some secret formula for success.

 

[FTSE Beater]

Hi MarketMaster

Thanks for your posts. It's the first time I've read less than positive comments about spreads trading

One of the biggest obstacle to profitable trading is the cost of trading, which is why spread betting is so disastrous for most people. It is easy to diminish the impact of costs when you focus on the possible profit of an individual trade.

I agree on short-term trades as the spread and cost is key, but on longer-term trades, I believe the commission charge and spreads become less of a problem.

My question about Joe being a broker was intended as irony as the advice to spread trade would benefit a broker the most!

Oops Sorry

 

[mheitkoe]

Joe Ross Free Trading Manual

Hello,

if anyone's interested Joe Ross' Free Trading Manual is starting again at chapter 1.

http://www.tradingeducators.co.uk/free_trading_manual_uk.htm

It contains dynamic strategies and the tactics with which to carry them out. It's a 320-page manual called the "Tips, Tricks and Other Trading Stuff.

I find it very useful.

 

[FTSE Beater]

Hi Mheitkoe

Thanks for posting the link up.
I managed to catch the last few chapters and they're were well worth reading

Thanks again

 

[Marc100]

Thanks!

Mheitkoe

Thank you kindly for the link.

Marcus.

 

[darrenf]

if anyone's interested Joe Ross' Free Trading Manual is starting again at chapter 1.

For those interested, mayfly posted a link further up this thread on 27/12, which allows you to download the entire manual at once. Saves you having to wait a fortnight for each chapter.

I've downloaded about 2/3 of the manual and can say it's a very decent read considering it costs nowt!

 

[mheitkoe]

Hi darrenf,

yes it's right. I heard that Joe updated the Trading Manual recently.
Don't know what version of the manual the link posted by mayfly is.
Would be interesting to now.

 

[nicos]

Following information from the following threat

http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=8324&highlight=joe+ross

I downloaded the whole book from this URL yesterday:

http://tradingeducators.com/free_trading_manual/

I read up to chapter 6 with great jopy. But what do you people think of Kim's handling of her short position in crude oil? I think she did the right thing closing it as the price subsequently went up! Or am I missing something?

 

[FTSE Beater]

Hi Nicos

I'm slightly confused when reading it. It says that Kim went short and that

By the end of the day, her crude oil futures have made a new high, and in the following days explodes into a genuine bull market

Instead of a magnificent win, Kim has a loss

To me that can't be right, she went short, the market rocketed and if she had stayed in, then she would be in profit.

Anyway,

I think she did the right thing closing it as the price subsequently went up! Or am I missing something?

What you are saying is that because the trade turned out to be a loss, she made the right decision.
What you are doing here, is using the power of hindsight. All traders are good with hindsight trading, but what you have to do is put yourself in that situation and what you SHOULD DO regardless of the result.
Yes Kim did the right thing (this time), but for the wrong reason and in the long run that will cost her.

Have a plan and stick to it.

Of course, the real mistake was listening to others views in the first place

HTH

 

[mheitkoe]

Hi FTSE Beater,

don't be confused ;-)
It was said before in the chapter that:

Kim listens intently to what he has to say and then begins to doubt her decision about the trade she has entered. The more she thinks about it, the more panicky she becomes. She considers abandoning her position even though she will end up with a loss. The fact that an “expert” has decided something else completely shakes her confidence. She exits the trade intraday and takes a $400 loss.

She had a loss because she exits her trade and takes $400 loss.
AFTER she exists the prices went up.
I totally agree what Joe writes:

Instead of a magnificent win, Kim has a loss (her $400). The loss is more than money, she has lost confidence in herself.

I agree with you:

...if she had stayed in, then she would be in profit.

IF, but unfortunately she didn't. She believed the advise from the 'expert'.

That' s how I understood it ;-)
Regards
Mike

 

[nicos]

Thanks for the comments guys.

Funny thing hindsight FB and when you think you have got that one out of the way..! What I wanted to say really is that it's a poor example in what is otherwise a very refreshing book particularly when he says that she would have ended up with a magnificent win.

Shall we say then that had she stayed with her original plan she would have lost $700 which she was prepared to do in the first place and she would walk away with her confidence unscathed and continue with the next trade. Which in effect amounts to a gain!

regards

Nicos

 

[Bigbusiness]

Anyone read this book? At $170 it looks a bit expensive but I have asked for details about the 100% money back guarantee.

http://tradingeducators.com/books/trading_by_the_minute/index.htm

 

[chump]

I've got a copy of Trading by the Minute ,probably not the most current. My opinion would be save your money.

In general, I find Ross has some nuggets,but they are interspersed with a vast amount of repetitive padding. I read it because it was free to me excluding my time,but if I had paid the asking price I wouldn't have been pleased.

In fact I am pretty sceptical about most of this type of publication. For the most part what they contain is freely available on the web. I distinguish between this type of publication , and a technical book like Murphy et al..

Cheers