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FUT-the spread



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Ok, back to trading issues...

One of things I've been working on the past several weeks is something I'm
somewhat surprised isn't covered in more detail in various books, journals,
etc...and that's the spread.

Not spread trading, mind you, just using the spread as a cue for taking net
positions in markets where it makes sense...such as the ags and energies.

It's certainly no secret that when the spread narrows (or even becomes
inverted) in these markers, then that's a bullish sign. And similarly, a
widening spread seems to offer reason to go short.

When you eyeball at a chart, you can see this quite clearly and I've begun
using it in my trading pretty successfully. But I am also wondering if the
decisions can be made quantitatively.

I've been trying to come up with a way to create an indicator that averages
the following data:

1) second month out minus near month
2) third month out minus near month
3) third month out minus second month

Unfortunately, when used in a mechanical approach, it's kind of like using
moving averages. Sometimes it works, sometimes it whipsaws you.

I'm happy just to use this data as just another tool in my decision-making
matix, but does anyone think an indicator based on the above offers any
promise in a mechanical system?

Just wondering...

-Richard