Here are some reasons to consider tracking and trading the spread between 2 different futures contracts. This is taken from Bob Carver's Marketclues website. This guy is sharp. Basically you create an equal weight spread between 2 different contracts - one part long one part short. I would like to start a discussion on this concept. It is particularly interesting to me because, in my observations, the spreads do trend very well, and when there is a directional move, you are almost hedged as all markets will move in conjunction. Anyway - here are his points and here is the whole article:
http://www.marketclues.net/spreads.html
# Spreads eliminate the need to call market direction correctly in order to make a profit. Instead, profits are taken out of the market simply by correctly determining which index will outperform another index, a considerably easier task to many than determining whether the market itself will move up or down.
# Spreads trend extremely well for longer periods of time than the underlying market direction.
# Spreads are very margin efficient due to the spread credit given by the exchange as the daily volatility is considerably lower than an outright position. Margin efficiency can mean bigger profits from spreads than outright positions when the spread is trending well.
# Spreads are less risky than an outright position due to the fact that news will often move both sides of the spread in the same direction. Unexpected bad news would tend move the market sharply lower, but it moves both sides of the spread lower, increasing the value of the short side of the spread. This allows the spread to be held overnight, rather than day-traded, to avoid surprise developments.