synthetic inter-market spreads
Sorry, I am not familiar with the contracts you are trading but I have traded synthetic/inter-market commodity spreads and would like to offer a comment.
Not sure what trading software you are using but I had success using the CQG Spreader platform several years ago trading the Kansas City/Chicago Wheat spread, 1-to-1. CQG had settings that would make sure the lesser-liquid KC contacts were filled first, etc.; however, you could still get temporarily hung with partial fills if you were trading lot sizes over 4-5 contracts. Others who were using TT had similar experiences....yada yada, but all that has changed since the CME bought the KC contract.
More importantly, what some of the spread traders learned the hard way is that even markets of highly correlated instruments can break-out of their "normal" ranges and trend for days or even weeks/months -- this year we've seen this in the S&P/Russell "spread".
FWIW, I watched several wheat spread traders get blown-out by continuing to fade a move in the spread price that kept going and "never" came back (that is, not before they were out of capital).
IMO, you should still have key points in mind while trading these markets like you would for any outright contract -- long-term S&R, etc. [I would have loved to watch the spread on a Market Profile chart -- anyone have experience trading inter-market spreads with Market Profile??]
My point is that If you are trying to trade a 'range', then have a reason to buy when it has gone lower, and to sell when it has gone higher -- don't just rely upon the "certainty" of a return-to-mean expectation to buy or sell. That worked for me.
Best regards.
