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Re: FUT-the spread



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{Here's an idea that you might want to play with:

I used typical price instead of the close to get a more representative value of
price.
I then simply added the values of the spreads that you mentioned in your post
and plotted the inverse so that we're buying on indicator upmoves and selling
on downmoves.

I then added an adaptive moving average (based on Perry Kaufman's work in
Smarter Trading) of the first plot to create a signal line that adapts to
volatility.  "Period" is the window used to measure volatility. "Fastrnd" is
the fastest period considered in determining the moving average. "Slwtrnd" is
the slowest period considered.

At quick glance, it seems to be working fairly well for the meats, but not so
well for the grains.

It needs some work, but I like the idea!

Nearby month is plotted as Data1, etc.

Anybody got any ideas they can add to this?

Bob Hunt}




Inputs: Period(10), Fastrnd(2), Slwtrnd(30);

Value1=TypicalPrice of Data2-TypicalPrice;
Value2=TypicalPrice of Data3-TypicalPrice;
Value3=TypicalPrice of Data3-TypicalPrice of Data2;


Plot1(-(Value1+Value2+Value3),"SpdSum");
Plot2(Plot2[1]+Square((AbsValue(Plot1-Plot1[Period])/Summation(AbsValue(Plot1-Plot1[1]),Period))*(2/(Fastrnd+1)-2/(Slwtrnd+1))+2/(Slwtrnd+1))*(Plot1-Plot2[1]),"Signal
Line");





Richard wrote:

> 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