Platform: various, but currently using X-Trader with plugin Tradingedge
Favorite Futures: currently Euribor, Bund, Bobl and Shatz
Posts: 100 since Jul 2012
Thanks: 100 given,
When you're looking at the yield curve of a spread throughout the day, this changes in various ways. The idea behind mean reversion is that whatever happens the yield curve will come back to the norm. I have not much experience with ZN and ZB, currently focused on Bund, Bobl, Shatz spreads as well as Euribor and Eurodollar. It's easier to understand with Euribor or any other future with a lot of contracts, as you can take a lot of different contracts and plot the yield curve. if you tried throughout the day to follow 7 contracts or so all in the right order. You will notice that prices fluctuate over this curve. At times it flattens, other times it steepens. If the trader knows how the yield curve should generally look like (you could call this position 0), then he/she can take positions when specific contracts are out of place. Spreads all have their own characteristics, but generally they're more forgiving then outrights in my opinion. you just pay more to your broker for it. The more volatile the spread the easier it is to make more trades, the harder it is to be consistent i found. I prefer the boring stuff like Euribor all day. If I can make only 1 tick a day every day I'm happy. I'm in trading for the money not for the excitement, I can go vegas for that. I hope that helps a bit to clarify things.
Don't let money control you, control money!
The following 3 users say Thank You to BenG for this post:
I was in Propex and traded 2 years there.I can say that his trader friend gave 100% correct information.These 4 products are their main products.And 10yrs traded most.
The actual complete spread is more complex rather than simple spread.They call it structure.But normally they dun enter full structure cos of heavy comms.If 3y 10y side itself can make money and just took profit from it.
The following user says Thank You to zh0001ye for this post: