I'd classify my trade today as a momentum continuation trade. I entered anticipating a continuation lower, but the market very quickly began absorbing selling. In my earlier post, I mentioned needing to be more patient with my entries. I think this is wrong...

I needed to be more aggressive with both my entry and exit today. The downward momentum on the open was quick and fast and I should have been hitting the market instead of waiting for a retracement. Once the absorption began, I needed to react quickly and exit my doomed trade. I'm trading a pretty short timeframe, which means that I can't afford to wait or be patient on entries and exits (unless, of course, I am unprepared or the market doesn't test prices in which I'm interested).

Momentum Continuation Trade: 0 Win, 1 Loss
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For tomorrow: NFP releases at 6:30 AM my time! I'm expecting a whole lot of nothing for the first ten minutes, and then a huge spike in volatility on the release. The overnight range so far is very small compared to last night. I'd expect basically nothing to happen until the report tomorrow. We also get both the US Unemployment Rate and Average Hourly Earnings at the same time. Needless to say, it will be a very volatile morning.

The NFP forecast is +190K. Unemployment Rate is expected to stay at 4.1%. We'll see what happens tomorrow.

Today's POC was 123-215. The low was 123-135 and the high was 123-245. I'd expect one of these prices to trade and break tomorrow based on the expected volatility brought on by the report.

If the reaction is bullish, I'll be looking for momentum up into 123-295; Tuesday's HVN and a significant historical swing high/low. At that point, I will be looking for absorption and for the market to rotate back down towards 123-210, which has seen quite a bit of volume trade.

If the reaction is bearish, I'll be looking for momentum down to knock out stops past 123-125.

If the reaction is neutral, I'll be looking for a test down to 123-165, and a test up to 123-250.

Quoting 

You're totally right, and I don't have the 10 year yields up when I'm trading. After Googling around a bit, I see that CNBC and Bloomberg have intraday 10 year yield data. Is this where you're checking yields, or does your data provider have a stream that you subscribe to? In any case, thank you for checking in! Part of my daily post-mortem is figuring out a way to trade better tomorrow, and this will certainly help.

@lax99
US Government Bonds
Investing.com is plenty good enough for retail to keep an eye on yields.

If you were operating in the institutional space, then you'd use a Bloomberg terminal or Reuters Eikon.

hi @kellys
would you mind sharing some screenshot of TT platform charts and spread settings that you use for trading ZN?
Do you look at mullti-days swings of butterflies, or do you look at intraday scalping?
As NT8, the platform I happen to be stuck with, does not allow (unless one is expert programmer) to draft (and trade) spreads with three legs (butterflies), I have tried in the past to get these butterflies charts and spreads also on TT but I was not able to find the right overall settings, neither how/when to update the ratios.
Maybe you can share some insights.
Thank you for the link on the handy chart of yield curve.
Best.

guidoisot 

hi @AlwaysValue47 would you mind sharing some screenshot of TT platform charts and spread settings that you use for trading ZN? Do you look at mullti-days swings of butterflies, or do you look at intraday scalping? As NT8, the platform I happen to be stuck with, does not allow (unless one is expert programmer) to draft (and trade) spreads with three legs (butterflies), I have tried in the past to get these butterflies charts and spreads also on TT but I was not able to find the right overall settings, neither how/when to update the ratios. Maybe you can share some insights. Thank you for the link on the handy chart of yield curve. Best.

@guidoisot
ZN is the outright and there are no spread settings. Not quite sure what you mean here? I could be misreading you. Apologies if I am.
I do at times scalp outright, but I really need a decent intraday driver to lean against if I do do this. I need an 'excuse to trade'. Having price moving around or orders flowing isn't good enough for me. That should be confirmation only.

I don't trade flys, only spreads.
If you go to the CME, they do all the work for you!
Here's the link: ICS Ratios
Once you get on this page, you're taking note of two things:
1. Price ratio — This is what you'll use to CHART your spread.
2. Leg Quantity Ratio — This is what you'll use to TRADE your spread.

What is critically important is that you understand what is driving the spread either up or down.
Once they set a spread in motion, they generally like to keep it rolling. We are considering the macro picture.

I am currently in the process of buying a property so I don't have much time currently to start posting charts and fine detail. My apologies!
If you're still struggling with the above, then let me know and I'll get back to you in February.
I'm stretched a bit thin currently.

kellys 

1. Price ratio — This is what you'll use to CHART your spread. 2. Leg Quantity Ratio — This is what you'll use to TRADE your spread.

This difference between 1 and 2 is the point than I have been missing so far.
This is very helpful, thank you.

I took one trade on Friday which I'd classify as a Pre-Breakout trade. After the news came out (148K act. vs 190k exp.), I waited to see bullish price action and aggressive buying up towards my target of last week's high 123-285. I saw buyers refreshing the bids and absorbing significant selling around 123-245 (about 6:31 AM MST) and I got long. Soon thereafter, I saw similar price action just after 6:32 AM and bought another lot. I exited at 280--just in front of the weekly high. For those unfamiliar with Bookmap: The yellow triangle is long, the purple is short. I've marked both spots where I bought at market, and the limit sell which sat around for a minute or two before hitting.



This trade was a winner and I saw the action well. However, upon replaying the price action, I needed to be quicker with my reaction and read of the action. I was two ticks late on the first buy and three ticks late on the second buy. I effectively left five ticks on the table of an eight tick winner. Part of this is certainly my own inexperience in reading order flow off the DOM, and I intend to improve in the future. I've spent probably 10+ hours since the Friday close listening to webcasts and watching different order flow videos to improve my eye for the market.
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Week 1 of 17: -1 tick. My bad read on the absorption Thursday Morning cost me a bunch this week. Now that I've seen it--and lost money because of it--I intend to eliminate that shortcoming in the future. I think what was really costly this week was me not taking advantage of the opportunities available on Friday. Just after 6:40 AM, we saw the bid get hit for ~2500, then ~1200, then ~1400. This should have been the big flag waving in front of me, saying "The buyers who were absorbing 245 are now either flat or offside. The market lost three ticks on three sell orders. This looks weak."

Week 1 of 17 Demons: First trade was bad--Exited Too Late, Entered Too Soon, Entered Too Late, Wrong Size. Second trade was better--Entered Too Late.

Average of 3 errors per trade so far. Not a huge sample size, but certainly important to reduce errors wherever possible.
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For Monday, 1/8:

There was a huge bid of ~7000 contracts sitting at 150 pretty much all day long. It later split to 6500 on 155 and 6500 on 150. A few poor souls sold 454 into that bid, but it held strong and the market didn't move. It seemed strange, though. If somebody actually wanted to buy even 5000 contracts at that price, why didn't they pay up later in the day? Most intraday action is speculation. Why didn't the short speculator get nervous and tick the market up a little bit?



Anyway, my anticipation is that we see a stop run sometime this week through last week's lows. In ZN, that means trade below 123-135. Corresponding prices in ZB and ZF are 151-17 (trendline break) and 115-240.

Last week's high ZN: 123-285
Last week's low ZN: 123-135
Friday LVN: 123-185/180.
Friday HVN: 123-200, 123-160

Thesis: ZN opens near Friday's close. Buyers from Friday cover into Friday's LVN, and then sellers step in to pursue the 135 lows. Depending on the high of the day, with an 18 tick range we could see down to 123-095 on an extended stop run.

Well, I'm going to throw my thesis out the window for the time being. It's strange that the market traded 130 overnight and recovered quite quickly. I have no bias going into today and it's going to be simply a matter of watching order flow for me. Good trading everyone!

Unfortunately, my GPU had some errors in writing this morning's screen capture to a newly installed SSD. I have no photos or anything to share this evening, but I do remember the trades that I took.

Trade 1: Momentum play higher. I was long 123-190 at 6:23 MST after seeing what I believed to be some buyer aggression and bid pulling indicative of an aggressive buyer. I scratched the trade four minutes later after seeing the same action in the opposite direction. I just checked YouTube too--big thanks to @TWDsje for posting today's price action! I'm not sure if he posted it in his journal, but here is the link anyway:

So, looking back over the price action during Trade 1 makes me think I was trading just to trade. I honestly can't see the reason that I got long other than a quick little pop that got my trigger finger itching. I'm glad I scratched the trade. Honestly, it should have been a loser because I was stupid about the execution.

Trade 2: Absorption play lower. I freaking love this trade and I really really really wish I had screenshots of the order flow at this point. Anyway, some buyer hit into the high of the day at 123-200 for over 10,000 contracts like a buffoon. I saw this when about 8500-9000 contracts had already bought, so I placed my short and was filled as the final 800 contracts hit the ask. I was filled 185 to flatten the short.

Looking back over the price action makes me think I should have hit this with larger size. It was the best option that I saw during the timeframe that I traded and I should have made more of the opportunity. One aspect of why I didn't leverage up is that I'm somewhat new to reading order flow. With time, I know, my intuition will improve and I'll take full advantage of opportunities like this.
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For tomorrow, 1/9/2018:

Sunday's ON action tested a 130 low, which is a tick lower than last week's 135 low. This seems like a bunch of crap to me. ZN has been selling downwards for months now; why didn't it break last night or this morning?

I have a theory. I think that whomever was selling the market for size on NFP Friday did a similar thing today. He/She wanted to get short a handful of contracts, make the market look weak, and wait for Large Lot Larry and Big Size Bob to jump on board too. At that point, He/She would have plenty of bids lined up just beneath the lows to get out of the shorts. But the market didn't break lower in afternoon trade on either day, which likely forced the Big Trader to cover the short position.

My thesis for tomorrow is that Big Trader has exhausted his luck trying to absorb bids and then hammer ZN lower. As a result, I think he'll be looking for higher prices to try selling at a more advantageous price. I'd like to see an open above 123-170 and a push into today's high of 123-200, and then see the market die out in afternoon trade around the NFP battleground of 123-215.

Conversely, if we see a lower open tomorrow and then see strong selling off the opening bell, I'll be looking for a stop run past 123-130 like I outlined over the weekend. Both myself and every other trader will be staring at that price; successful trading in this case is going to be a combination of aggression, quick decisions, and as always risk management.
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ONH = 123-160
ONL = 123-095

Open looks like it's going to be lower. Once again, the fact that the ON auction touched new lows without giving big players a chance to play is a bunch of crap. Either way, we're going to touch 095 again sooner or later. I'll be watching the open closely for signs of an opening drive. It might be a good time for a momentum play.

Something weird I'm seeing right before the open: ZB is nearer to lows, ZN is mid to high range, and ZF is a tick off of highs. Maybe some sort of spreading??

Two trades again today. Both were shorts and both should have been winners.

Trade 1: Short 135 and 130 at 6:24. I saw sellers whack into the bids and then Lure buyers into giving the sellers a fill. I sold the second contract at 6:26 when we saw another 6000 hit the bid. I scratched the trade at 130 after seeing very little seller follow through. It seems that there was some seller absorption after the fact, and I should have been a little bit more patient with the trade.




Trade 2: Short 125. There was a ton of seller absorption at 130 which resolved itself lower--but only briefly. The market ticked against me, but thankfully sellers stepped in again and cracked ZN down towards my 110 exit price.



Both trades were momentum continuation trades. The first would be classified as a momentum/absorption which I misread and exited too soon on.

In hindsight, I should have waited to see the resolution of the seller absorption at 130 before deciding to stop out or not. This line in the sand would have kept me in the short and making more money. And after all, this game is all about making money!
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For tomorrow: Line in the sand for profitable OTF shorts is going to be 123-130. Like I've said on previous updates, I really don't think that we're going to see a large bounce. When interest rate markets start to trend, they trend strongly. I'm expecting tomorrow's 18 tick range to see a high around today's midday consolidation area of 123-020 to 123-040.

The play: Momentum lower with large sellers. Put on size when a clear edge presents itself and make the most of the opportunities which come.

High: 123-155
Low: 122-310
Area of Interest: 123-050, stop run below 122-310

We're really moving now! ONH = 123-030, ONL = 122-225, ONPOC = 122-250.

Whole lot of action going on, and I think it's going to be a matter of seeing whether the US traders agree that Europe's bearish trade was the right way to go. Here's a screenshot of the ON action because it's been ages since something interesting like this has happened.



What's interesting as well is that ES is down ten handles with the bonds on lows. Usually the correlation works the other way round...

If anybody is reading this, days like these--assuming the volatility hangs in there all day long--are NOT days for the average retail trader to start going crazy with a 5 or 10 lot. Volatile days like these are days in which one needs to control risk to stick around to trade tomorrow. Don't try to be a hero and buy the bottom like I used to!