I was thinking since the EMA is of a 5 minute period (or maybe better a 30 minute period) that the problem of a lack of
exact identical times would not introduce a large error?
I guess it depends on what you are doing with it, and what for your purposes is considered a large error. For your situation, it might not matter at all if they are off a little bit.
I have been using the ratio of 2 moving averages for (ES-YM) with mostly good results.
According to my charts the spread (ES-YM) has been trending down since July 25, 2017.
I use Sierra Charts which has good applications for ratio and difference charts.
But I have not been able to chart the calendar spreads very well ( CL - CL for example.)
Thanks H. Hampton.
The following user says Thank You to datahogg for this post:
Great question! Let me clarify and say that I was never really introduced to it, I just gave it a brief whirl.
If you can trade exchange traded spreads it's the way to go. For example, I have recently traded VIX futures calendar spreads. It's much easier than trying to leg in.
I have recently contemplated putting on some NQ/RTY spreads due to the relative strength of NQ, but ultimately these relationships do fluctuate and I find it easier on my tiny brain to just trade outrights in general.
Really though, a trade like this is ideal in a time like this if you're willing to let it work a few days, IMO. But I just haven't been inclined to give it a look, but perhaps I will now, thanks for the bump here!
The following 3 users say Thank You to josh for this post:
Which broker can allow access to exchange spreads ? Or who are the brokers that would recognize spreads and reduce the margin as per SPAN. I want to trade yield curve spreads and commodity spread but not sure if any retail broker can understand it. I am with AMP and IBKR now.
Ex If I want to trade NOB spread 5 ZN - 2 ZB... This is 7 contracts to leg it and can be a huge margin if not treated from the broker as spread.. also how can I trade the symbol NOB to reduce the accuracy requirements and timing of legging .. This is not a clear area in the retail .. any recommendation of brokers who allow or recognize spreading or tools or platforms are appreciated. I use Sierra Chart and IBKR TWS..
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
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I would have thought the ability to trade 'exchange listed spreads' was more a software related issue rather than a 'broker issue'. For example with Tradestation if you use their main Tradestation software, you have no access to exchange listed spreads but if you use their Futures Plus software (which is now just rebranded/white labeled TT but even prior to that it was the same) you do have access to them.
Margin requirements will be broker specific. All the bigger FCMs offer this, but I'd be speculating on others, I would be surprised if either AMP and IBKR didn't offer spread offsets though.
I am really glad this thread is being discussed, and remains current, and not stale by a few years old and no commentary since.
I first came across pairs trading by a Canadian trader who specialized in equity trading. At the time, the objective was to increase actual trading volume because the prop shop benefitted from the commissions and not whether or not you win or lose. The scenario shares many threads to these funded trader shops in their practices not being inline with one's profitability or capability or learning curve.
I am very impressed to see that the concept of pairs trading has been applied to futures index trading, although spread trading has existed for almost ever.
my biggest question is whether this applied spread concept works best towards the highest volume emini / emicro futures or relies more heavily on symmetry and co-relation, such as when the ES and NQ trade in tandem and the YM trades opposed to their trend?
The following user says Thank You to limitdown for this post:
I know Infinity Futures understand SPAN margin and can calculate risk correctly. When I was with them in 2017, a BUB spread (ZB - UB) was approximately $1700 to put on.
It seems that most charting packages do not plot spreads accurately.
For those with experience, what trading platform charts spreads best.
Thanks in advance.
