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Friday January 19, 2018
F.A.Q Print

Question: I am a beginner to trading and want to know if spread trading is too advanced for me?

Answer: Spread trading has several advantages for beginners or experienced traders because they have reduced volatility, lower margin and have smoother trends than outright positions. This allows any trader to operate in a less stressful environment, learn pattern recognition, develop their money/trade management skills and better define their comfort zone.

Question: Do I need special charting software and live data for spread trading?

Answer: No. We provide daily charts in the member's section. Virtually all charting applications today support spread charts and you can use end-of-day or delayed data. Just Spreads uses charts and data from IDC (eSignal) and recommends their OnDemand application which costs around $1.50 AUD per day. It has the same features and functionality but comes with delayed data. A calendar spread in a bar chart has all the same charting features as an outright futures contract.

Question: Why is there so little information about spread trading?

Answer: Market hype and many brokers would have you believe that it is not as exciting or profitable as day-trading or a ‘secret’ proprietary trading approach. In reality however, these trading styles generally require large account balances, expensive membership fees and generate much more trading activity which usually means more brokerage. Large commercial firms and professional traders know all about the benefits of spreads and use them daily. The smaller speculators (retail trader) are the least frequent users of spread trading. This is due to the complexity of tracking and analyzing most spreads. Just Spreads has purposely selected specific calendar spreads due to our experience in these markets.

Question: Will my trading platform support my spread trading?

Answer: Most trading platforms will not provide the level of service required to manage conditional orders such as STOPS or OCO orders. In most cases it requires a 'hands-on approach' either by yourself or with an advisor that can look after your orders. Just check to see if your platform lists exchange-listed spreads. Please visit the Trading Services page in this website for a low-cost offer.

Question: How much money is required to open an account for spread trading?

Answer: It will vary from broker to broker but generally $5,000 is the usual account minimum. You will never ‘get rich’ with a $5,000 or a $10,000 account but you will be able to hone your trading skills, build your confidence and decide if the returns warrant more equity in your trading account. Your expectation should be based on achievable outcomes within the limits of your account balance and risk tolerance. By using calendar spreads you can manage as many as 4 or 5 (low margin) spread positions with a $5,000 account. Remember to stay within your comfort zone and allow for equity and margin variation relative to your account balance. It is recomended to use no more than 50% of your account balance for margin requirements.

Question: I want to know what period of time is recommended to determine the viability of spread trading?

Answer: As a spread trader you inherently become a position trader i.e. holding a spread position for more than one day and in some cases up to 60 days. As such, it is imperative that you allow a reasonable amount of time to fully appraise performance. A minimum of three months is recommended. You should know by the end of six months if the return on your investment or starting account balance is performing to your satisfaction.
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