"For those who have already accepted the discipline of trading based on fundamental relationships across contract months and among commodities, Scarr Visual Trading might be all they need." - Futures Magazine - April 2005, Software Review




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Purpose

I started Scarr Visual Trading in order to provide sound, accurate studies and charts for the analysis of the futures market. When I began my study of the futures market in 1994, most of the technical analysis I saw either had no sound basis or failed rigorous backtesting. My research into fundamental analysis showed that readily available data on supply and demand was immediately discounted by the market, giving no chance to profit. The only research I could base my trading on was that based on sound statistical and economic principles such as seasonal trends. But, when I tried to find seasonal charts with the features I wanted, I came up empty. So, I began writing programs to generate my own custom charts.

Background

I am a self-employed researcher with a background in the hard sciences. My formal education includes a B.S. in Mechanical Engineering and an M.S. in Physics from Old Dominion University in Virginia, and an M.S. in Math Modeling from Humboldt State University in California. I brought this education and experience to my study of the futures market and began writing programs which have greatly helped me in trading spreads and outright positions. These programs work for me and they can work for you as well.

My Pledge

I promise that the charts and studies presented on this site will be as accurate as I can make them. I also promise that there will be no “magic indicators” or “black-box” systems – all charts and studies will be fully explained. I will always be available to you for technical support and to quickly answer any questions. And finally, no program or system can make you rich overnight in the commodities market - anyone who tells you their system can is being un-truthful. I can tell you that if you use the programs on this site they will improve your trading. That is my pledge to you.

Dan Scarr

Scarr Visual Trading server1: 104.130.207.140
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Filtering Trades: Outright Positions

Let's assume that it is the end of February 2005 and we are considering a long position in Cotton. Let's use the All-Months Continuous Contracts program to generate the chart below.

From this we see that cotton is low with respect to its historical range, generally a good sign for a long position.

Next, the seasonal tendencies are checked using the Multiple-Month Seasonal program.

This chart showns that all the contracts have the same basic behavior, especially in March. Notice that in the marked area the May and July contracts show the greatest seasonal movement. Let's zoom in on this area.

This chart shows that we should look for a low entry point for the May or July contract starting around the end of February and hold until around March 14.

Let's now examine the reliablility of the May seasonal. For this, we can use the Single-Month Seasonal program which produced the following chart.

Since the standard deviation lines are not relatively close to the seasonal during February and March, this time of year will not be the most reliable for the seasonal.

There is another check of seasonal reliablity using the Seasonal Consistency program. This program takes the last 20 years of data (or less if there is not that much data) and divides it into two equal time periods. Then a seasonal is made from each time period and both are plotted.

Let's zoom in on the divergence near the end of the seasonals.

This chart shows why the reliability of the seasonal is not great. From March 9 until contract expiration, the "Old" seasonal rises while the "New" seasonal falls. This argues against the trade.

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