Futures Spread Trade (Calendar)

Entry Logic

• Exact Entry Trigger: Enter a calendar spread by buying a longer-dated futures contract and selling a shorter-dated futures contract of the same underlying asset.
• Confirmation: The spread should be trading at a historically attractive level.
• Timeframe: Daily chart.
• Location Context: Not applicable.
• Market Condition: A market where the term structure is expected to change.

Exit Logic

• Profit Targets: A fixed target based on the expected convergence or divergence of the spread.
• Scaling Out: Not recommended.
• Trailing Stop: Not used.
• Signal Failure Exit: Exit if the spread moves against you by a predetermined amount.
• Opposite Signal Exit: Not applicable.
• Time Expiration: Exit the trade before the front-month contract expires.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: A fixed stop based on a percentage of the account value.
• Soft Stop: Not used.
• Max Dollar Loss: Varies by spread.
• Max Percent Loss: 2% of account capital.
• Structural Stop: Not applicable.

Risk Management Framework

• Risk Per Trade: 1% of account capital.
• Maximum Daily Loss Limit: Not applicable.
• Maximum Weekly Loss Limit: Not applicable.
• Maximum Drawdown: 15% from peak equity.
• R:R Requirement: Varies.

Position Sizing Model

• Sizing Approach: Fixed contract size.
• Volatility Adjustment: Not applicable.
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions to Avoid: A market where the term structure is unpredictable.
• Specific Setups Required: A clear and historically significant opportunity in the term structure.
• Instruments: Any futures contract with multiple expiration dates.
• Time Restrictions: Can be traded at any time.
• Chop/News Avoidance: Be aware of major news events that could impact the underlying asset.

Context Framework

• Trend Direction: Not applicable.
• VWAP Relationship: Not applicable.
• MA Relationship: Not applicable.
• Range Location: Not applicable.
• Higher TF Alignment: Not applicable.

Trade Management Rules

• Breakeven: Not applicable.
• Scale Out: Not applicable.
• Add Size: Not recommended.
• Fast vs Slow Moves: This is a slow-moving strategy. Be patient.

Time Rules

• Optimal Trading Window: When a clear opportunity in the term structure presents itself.
• Times to Avoid: When the term structure is flat or unpredictable.
• Session Notes: This strategy can be traded in any session.

Setup Classification

• A+ Setup: A historically wide or narrow spread with a clear catalyst for convergence or divergence.
• A Setup: A significant deviation from the historical norm.
• B Setup: A minor deviation from the historical norm.
• C Setup: Avoid. The spread is trading at a normal level.

Market Selection Criteria

• Instruments: Any futures contract with multiple expiration dates.
• Volume/Liquidity: High volume and liquidity are essential in both contracts.
• Volatility: Moderate volatility is preferred.

Statistical Edge Metrics

• Win Rate: 70-80%.
• Avg Win: Varies.
• Avg Loss: Varies.
• Profit Factor: Varies.
• Expectancy: Varies.

Failure Conditions

• When Strategy Fails: When the term structure moves in an unexpected direction.
• Specific Scenarios to Avoid: Trading spreads with low liquidity.

Psychological Rules

• Mental Discipline: Have a deep understanding of the underlying asset and the factors that influence its term structure.

Advanced Components

• Regime Detection: Not applicable.
• Filters: Monitor the term structure for opportunities.
• Correlation: This strategy is based on the relationship between different futures contracts of the same underlying asset.
• MTF Alignment: Not applicable.

Location

• Where Strongest: In markets with a predictable term structure.
• Where Weakest: In markets with an unpredictable term structure.