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New to Bonds which one should I look at first.


Discussion in Treasury Notes and Bonds

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New to Bonds which one should I look at first.

  #1 (permalink)
gracepips
Northern Ireland, UK
 
Posts: 68 since Dec 2010
Thanks Given: 76
Thanks Received: 43

Hi all, I'm just starting out on my futures journey after trading Spot Forx for a few years.

I am looking to build a portfolio of around 12 instruments that I watch daily on 3 - 5 range charts depending on their volatility. I'm a day trader. Mostly looking for simple pullbacks as trend continuations and looking for failed breakouts and tests at significantly higher time frames (60min) support and resistance. All this is based on looking for trapped traders and trying to place myself where their triggered stops overflow will carry my trade at least for a sclap. I just use price action and a greyed out 20 ema that's it. I try to look for smooth flowing charts. This has kept me away from the ES so far as recently I see a lot of chop although I know its very very popular with day traders.

So far I look at the 6 major FX Futures
CL
TF
YM
FDAX
NG

So I have one space left and would like to add a bond. As I starting point which bond should I be looking at that has good volatility and is suitable for day trading. Also since I might be looking for a 4-6 tick scalp I need a bond that has no more that a 1 tick spread. I realise that eventually I'll become more familiar with bonds and can make my own better informed decision but as this is my first exposure I'd be thankful for a point in the right direction.

Oh bye the way I'm from the UK and can comfortably trade the UK and US open.

Many thanks for the anticipated info and advice..........I'm eager to learn

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  #2 (permalink)
 
Fat Tails's Avatar
 Fat Tails 
Berlin, Europe
Market Wizard
 
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Bonds are quite technical, much more than index futures.

You are competing with bond traders who understand forward rates and yield curves.

You should be aware of treasury auctions and there impact on market prices.

You should understand intermarket relationships, as the bond markets are often considered a safe heaven, when fear is spreading, you need to monitor

- the dollar index
- the main FOREX pairs

Also there is little price action compared to index futures or commodities like CL. Scalping bonds does not make sense to me unless you are want to catch the spread between the bid and the ask, but this would be a strange endeavour, as you compete with large players not paying retail commissions.

Maybe I am wrong here, and other comments are welcome.

The liquid bond - or treasury note - contracts are ZB, ZN (CME) and FGBL (Eurex).

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  #3 (permalink)
gracepips
Northern Ireland, UK
 
Posts: 68 since Dec 2010
Thanks Given: 76
Thanks Received: 43



Fat Tails View Post
Bonds are quite technical, much more than index futures.

You are competing with bond traders who understand forward rates and yield curves.

You should be aware of treasury auctions and there impact on market prices.

You should understand intermarket relationships, as the bond markets are often considered a safe heaven, when fear is spreading, you need to monitor

- the dollar index
- the main FOREX pairs

Also there is little price action compared to index futures or commodities like CL. Scalping bonds does not make sense to me unless you are want to catch the spread between the bid and the ask, but this would be a strange endeavour, as you compete with large players not paying retail commissions.

Maybe I am wrong here, and other comments are welcome.

The liquid bond - or treasury note - contracts are ZB, ZN (CME) and FGBL (Eurex).

Thanks Fat Tails, This was the type of informed answer I was looking for since my current knowledge of bonds in next to zero. I'll ponder what you said, but with their being so many markets to choose from perhaps I'll look for a less technical instrument to compliment my simple trading styles need for smooth price action and good liquidity/volatility.

Would you have any suggestions, I'd appreciate your thoughts. One that I am considering is the DX .....Thanks again

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  #4 (permalink)
 
Fat Tails's Avatar
 Fat Tails 
Berlin, Europe
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gracepips View Post
Thanks Fat Tails, This was the type of informed answer I was looking for since my current knowledge of bonds in next to zero. I'll ponder what you said, but with their being so many markets to choose from perhaps I'll look for a less technical instrument to compliment my simple trading styles need for smooth price action and good liquidity/volatility.

Would you have any suggestions, I'd appreciate your thoughts. One that I am considering is the DX .....Thanks again

There is a thread comparing instruments to trade here:



It started with index futures, but includes other instruments as well.

DX is not suited for scalping, as it is not liquid enough. If you want to find liquid futures contracts, just have a look at the daily volume. DX has about 25,000 contracts traded per day, which is not bad, but not enough for scalping. You could look at

6E: 320,000 contracts
6J: 140,000 contracts
6B: 120,000 contracts
6A : 100,000 contracts
GC: 150,000 contracts (Gold, CME-NYMEX)
BC: 180,000 contracts (Brent Crude, IPE)
ZC: 170,000 contracts (Corn, CME)

The numbers refer to the average daily volume over the last 50 days.

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  #5 (permalink)
 omaha786 
San Diego, California
 
Experience: Intermediate
Platform: Sierra Chart
Broker: IB, OEC, Optimus, DDT
Trading: ES, ZN
Posts: 221 since Jun 2010
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Would you consider grain markets? If you do, try ZS (soybeans), it has good daily range and volatility.

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  #6 (permalink)
gracepips
Northern Ireland, UK
 
Posts: 68 since Dec 2010
Thanks Given: 76
Thanks Received: 43


Fat Tails View Post
There is a thread comparing instruments to trade here:



It started with index futures, but includes other instruments as well.

DX is not suited for scalping, as it is not liquid enough. If you want to find liquid futures contracts, just have a look at the daily volume. DX has about 25,000 contracts traded per day, which is not bad, but not enough for scalping. You could look at

6E: 320,000 contracts
6J: 140,000 contracts
6B: 120,000 contracts
6A : 100,000 contracts
GC: 150,000 contracts (Gold, CME-NYMEX)
BC: 180,000 contracts (Brent Crude, IPE)
ZC: 170,000 contracts (Corn, CME)

The numbers refer to the average daily volume over the last 50 days.

Wow this is a great help, I'm off now to read through the link you posted, yum yum Many thanks for taking the time to answer my basic questions,,,,,,,,,,,

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  #7 (permalink)
 nostrabus 
Salvador, Brazil
 
Posts: 16 since Mar 2011


gracepips View Post
Hi all, I'm just starting out on my futures journey after trading Spot Forx for a few years.

I am looking to build a portfolio of around 12 instruments that I watch daily on 3 - 5 range charts depending on their volatility. I'm a day trader. Mostly looking for simple pullbacks as trend continuations and looking for failed breakouts and tests at significantly higher time frames (60min) support and resistance. All this is based on looking for trapped traders and trying to place myself where their triggered stops overflow will carry my trade at least for a sclap. I just use price action and a greyed out 20 ema that's it. I try to look for smooth flowing charts. This has kept me away from the ES so far as recently I see a lot of chop although I know its very very popular with day traders.

So far I look at the 6 major FX Futures
CL
TF
YM
FDAX
NG

So I have one space left and would like to add a bond. As I starting point which bond should I be looking at that has good volatility and is suitable for day trading. Also since I might be looking for a 4-6 tick scalp I need a bond that has no more that a 1 tick spread. I realise that eventually I'll become more familiar with bonds and can make my own better informed decision but as this is my first exposure I'd be thankful for a point in the right direction.

Oh bye the way I'm from the UK and can comfortably trade the UK and US open.

Many thanks for the anticipated info and advice..........I'm eager to learn


From my experience it is not a good Idea to watch and trade to many markets, since they are all correlated there is not much argument for diversification

Since you are a Beginner, I would recommend maximum of 2 markets, and better trade more contracts in a market where you make money...

I trade for 12 years and I trade only 1 single market: ZB

best regards

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  #8 (permalink)
gracepips
Northern Ireland, UK
 
Posts: 68 since Dec 2010
Thanks Given: 76
Thanks Received: 43


nostrabus View Post
From my experience it is not a good Idea to watch and trade to many markets, since they are all correlated there is not much argument for diversification

Since you are a Beginner, I would recommend maximum of 2 markets, and better trade more contracts in a market where you make money...

I trade for 12 years and I trade only 1 single market: ZB

best regards

nostrabus, thanks for the advice and I think I may end up agreeing with you. I'm waiting for my Optimus account to fund from my UK bank and in the intervening weeks I've been demoing the 10-12 markets on 4 range bars and it is probably too difficult to watch them all. If anything I'm inclined to lose my focus scanning them all.

I think to begin with I may just look at the 6E and 6B for the UK open and maybe the YM or TF at the US open. One thing Mike said somewhere and it resonated with me was his liking for the CL as he knew each day would give him lots of opportunities and so kept him from over-trading as he knew there was a good possibility of a significant more and he could wait for the perfect set-up and not force the trade. Now before anyone gets worried, the CL is too much of a wild pony for me at this stage but I got his point.

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  #9 (permalink)
 
Fat Tails's Avatar
 Fat Tails 
Berlin, Europe
Market Wizard
 
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Trading: Keyboard
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nostrabus View Post
From my experience it is not a good Idea to watch and trade to many markets, since they are all correlated there is not much argument for diversification

Since you are a Beginner, I would recommend maximum of 2 markets, and better trade more contracts in a market where you make money...

I trade for 12 years and I trade only 1 single market: ZB

best regards

Very valuable advice.

Better know one market really well than being the Jack of all Trades.

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  #10 (permalink)
 eman 
Galveston ,TX
 
Experience: Intermediate
Platform: NT7
Broker: Zaner
Trading: Futures
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a few years ago i tried trading ZB and ZN on tick charts. this was before they changed something on the ZB (which i have since forgotten). i found that the action on the ZN was much more prone to fluctuate/run than ZB, which reminded me of watching paint dry.

my broker offered me much better commissions compared to the ES, which was a positive for the ZN. in addition, the tick-value for ZN is 15.625 (1 / 64) compared to the ES which is 12.50. so 3t on the ZN was 4t on the ES. that worked well for the scalping system i was trading at the time.

cheers,
-e

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Last Updated on April 6, 2011


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