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I've been watching and sim trading Bonds for a while now. I trade it very much in the spirit of John Grady, relying heavily on the DOM. I also use Auction Market Theory to keep track of value over various periods of time, in other words, the state of the short-term, mid-term, and long-term auction.
I've been reading and watching everything I could find about Bonds in general, but I feel like I'm still lacking some knowledge about Bonds fundamentals.
After reading everything that was posted in this part of Futures.io, I came across this post by member josh:
This threw me off, as I believe I have a general understanding of what Bonds are, how they work, how the curve works, what auctions are. But now I'm doubting whether I'm actually fully prepared to trade those products.
I'd like to know if any senior Bond trader member could point me to a place where I could read informations useful to daytrading the Bonds in general. Again, I'll quote josh to explain what sort of informations I'm looking for.
When I was coming up in the business, every bond trader had at least one book by Frank J. Fabozzi on his desk. The Handbook of Fixed Income Securities was required reading, Bond Markets, Analysis and Strategies might have been part of the CFA curriculum when I went through the program (not sure, it was a while ago), and I found Fixed Income Mathematics very helpful as well.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
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^^^ This +1 ^^^
I would say though that understanding how bonds price, bond math, convexity, duration etc is a) not easy and b) probably not a prerequisite to trade Bond Futures. But if you don't understand it you need to remember there are people out there that do, and that may give them an advantage over you. I think that's the case in most markets though. Not every ES trader is an equity analyst. Not every CL trade understands the economics of drilling a well. etc etc
Thanks! That's in the ballpark of what I'm looking for, although it looks pretty steep, I surely will be able to get some value from it.
I am by no means a professional, nor do I have the desire to become one. I chose Bonds because the orderflow is cleaner, slower, and more digestible than equity indexes. It allows me to keep my risk tight and take quick 2-3 tick scalps.
The tick to commissions ratio is also advantageous to retail traders.
My goal is to know ZN & ZB like the back of my hand, and be able to scale up as I gain experience. I've been consistently extracting about 5 to 10 ticks from the markets every day for a month, playing ranges and moves out of balance.
I go where size goes, I never step in front of the train, I fade in specific conditions, and I'm looking for my edge using the tape and the order book.
As SMCJB mentionned, not every CL traders understands the economics of drilling, so I'm unsure Bonds' math will my day to day trading.
I just want to make sure the success of my system for trading Bonds is not just a lucky streak, that's going to end the day I get caught on the wrong side of something, or that my read of the market was completely wrong because I was missing some vital informations or knowledge.
Sounds like you're doing just fine without fundamentals
I have to admit, I've always been a bit skeptical about order flow in rates futures due to the huge arb and spreading flows that go through each of these products throughout the day, but if you can make sense of it then more power to you!
It's possible to spot spreading activity. When the curve is out of sync, breakouts and momentum are less likely, but when the whole curve is pressing the highs or lows, the moves will get cleaner and stronger. It's all about looking for uniform pressure across ZB/ZN/ZF.
On some days, the spreading activity is so obvious that a lot of chop is to be expected. But for the last few days for instance, all three products were very much moving together, and there was nice volatility and momentum behind the moves.
Fundamental data is usually not something that leads to rapid market changes. I emphasize: as a rule.
Of course, there are events which are so serious that they have an immediate impact on the market. But these are rather the exception.
Some ideas and alternatives to "Fundamental Data" if interested in:
If US Bond trading is really to make profits in a period of one to five or ten days with out FD, then I recommend other ways to move on. If it is also not about pure TA trading, then there are also excellent trading strategies with options and futures to make money. Just to mention one like the "Synthetic Condors" beside many other such trading strategies.
This is just an alternative idea if you are not able to get further with the search for fundamental data in your trading decisions.
Another alternative or add to the analyzes is certainly the comparison of market correlations. What does this mean? Also here just one example to give an idea: Stocks go up, dollar goes down, euro goes up and the 30 year US treasury bond goes down. You have to follow this daily to get a feeling for it, but it is not as complicated as it may sound. Just look at the selected markets every day on the chart. Then you see it automatically over time.
Furthermore, all the best in the search for the perfect for yourself.
I think this has some good info to get you started in understanding the yield curve-spread trades, that cand partner with your Bond trading. I keep the spreads on separate chart while I'm trading the bond futures. Just a start.
