Bonds Vs. indexes for beginners - futures io
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Bonds Vs. indexes for beginners

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Bonds Vs. indexes for beginners

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  #1 (permalink)
Experience: Beginner
Platform: NinjaTrader
Trading: ES
Posts: 110 since Sep 2014
Thanks: 60 given, 20 received

I am wondering which kind of market is better for beginners. I have read that the Indexes tend to give second chances but they are more volatile, and that bonds tend to move in more linear trends. My question is, which of both gives better opportunities specially when using an orderflow and volume profile strategy.

Can orderflow and volume profile be interpreted effectively while trading the 10 or 30 year bond? What variables are to be taken into account? I think No BS has a focus on bonds but it seems to be for a scalping kind of trading style, which I don't know if its suitable for beginners, while the prices tend to move in trends.

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  #3 (permalink)
Chicago + IL/USA
Posts: 20 since Sep 2014
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i think bond is more difficult. you will be up against seasoned bond traders. you will also have to take into account interest rates, counterparty default risk, coupon cash flow streams, shape of the yield curve, etc. You need to be familiar with all the bond trading strategies like barbell, butterflies, and hedge with ted spreads, etc. Personally, indexes are far easier for me to handle. just my thoughts. u might do better.

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  #4 (permalink)
Buffalo, NY
Posts: 64 since Jul 2014
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jamesico you don't think you are up against seasoned traders on ES? That is absurd.
For every factor you listed for bonds it is easy to name one that drives the price of the index.

The big difference between the two is volatility. Interest rates are a bit more anchored down by the fed so you won't get the volatility you will in the stock market. That doesn't make one easier than the other though, it just makes the strategy a little different.

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  #5 (permalink)
mccall+idaho/united states
Posts: 2 since Nov 2014
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i have been trading the es for the last 4 months and after commissions I'm pretty much at break even , when i started jan 2014 the es chewed me up pretty good if you get stop to close it is like a magnet and to me now it is very volatile and requires a solid plane and a aggressive trader to make money in this market or maybe a very patient trader i have been looking at the bond and gold ..backtesting and live paper trading the tend to trend better for me intraday than the es at least most days i have been using a 377 tick with an 89 ema waiting for pullbacks ... risking 5 ticks and 45% of the time making 10 - 20 ticks on bonds now i do not know yet if you put a stop 5 ticks away if it will do like the es to me does not apear that it will but won't know that till i take this method live after the first of the year ...i also use daily volume profile with the value area reduced to 25% then draw price levals from the high and low of theses areas for any day that is close to the price then when i start paper trading i turn the volume profile off when price is below the 89 ema i only look for shorts when price is above only look for longs it has worked pretty good for the last 2 1/2 weeks but we all know how things look in hind sight so i will try to remember to post agin after the first of the year but me personally i think you are looking in the right direction as a beginner whited i had done more research before jumping in 10 + years ago i have lost thousands of dollars starting in forex twice then penny stocks then stocks then the minis now i am looking for that trending market that easier to stay on the right side of and is not so herky jerky so hope you learn ,and test the waters for your self with paper trading first it took me losing a large amount of money to figure out that your not going to go from not knowing any thing about the markets to pro trader over night i would think that most will do it quicker than i am but maybe not hope this helps and remember test your system first then if profitable with fake money go live with small amount and stick to your rules ALL the time

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  #6 (permalink)
Legendary Market Wizard
Houston, TX
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You might find @Fat Tails analysis of index contracts, their cost of trading, and the expected profit on different time scales interesting in this thread.
Comparing Index Futures

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  #7 (permalink)
Experience: Advanced
Platform: NinjaTrader
Broker: IB / Kinetick
Trading: ES, CL
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Posts: 489 since Apr 2012
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Whatever market you trade and in whatever geography and currency, you will be up against the most skilled and professional traders in the world!
Any institution in fact employs at least 20 of the top geniuses of this world (and that's in each of their offices around the globe) and pay them huge cash too so don't expect at all to find a market that is shaped for beginners, soft and kind on you or forgiving in whatever sense you intend...

You will have to work hard, train at home first, but then directly compete in the first class league - there is no way around it!

This said, each market has its particularities, and you might find yourself better fit to a particular instrument or group of instruments.

It is like in sports, you might be better suited for basket ball instead of hockey, or whatever...
Your body shape could be helping you better at running marathons instead of doing heavy lifts, but usually never both!

So you have to find the markets that suite your personality, expectations, patience, and pain levels; and you only do this unfortunately with simulations and back tests, and then real life experience and some trials and errors so to speak.

For me, I've found that bonds are easier because they are very often slower than indexes or commodities, so you have more time to do your analysis and chart reading - but this of course depends on your trading style in the first place; and doesn't mean that the market is suitable for beginners neither are equities, currencies or commodities.

One approach I see very often, is choosing the market based on its volatility and tick value/commission cost versus your available cash that you have in account and your risk management strategy you wish to apply.

For example, if you have $25k in account, and you wish to risk 1% only on each trade; then you can only lose 250$ before your stop is hit.
Now if you select the ES to trade, that means you can afford a 5 points stop on 1 contract. But are 5 points enough for your selected time frame? If not, then you cannot trade the ES, and you would probably need to move to some other markets; let's assume NQ for the sake of example

Now with NQ, you would have a 12.5 points stop on 1 contract, but again are these enough for your selected time frame volatility?
Maybe 6 points are enough on NQ given your trading strategy, and so in that case you might chose to trade 2 contracts instead and a stop of 6 points to remain in your initial 250$ stop loss, and so on...

This is just an example to give you some guidelines and a starting point.
I know it is not always easy to discover all there is to discover in this business and from the very beginning.
So don't hesitate to ask shall you need further clarifications.


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