Bond Futures, Not Sexy but Worth a Look!

[brownsfan019 17]

Thank you for your help Brownsfan and Ronin.

 

Brownsfan, I was trading ZB on January 16 of this year and the bid/ask was as high as a gap of 6 ticks. Do you recommend a timeframe to start with?

 

Much appreciated,

 

Chris

 

Chris - during 'normal' conditions there is no spread, meaning there is bids/asks on each side. You will however see a spread or gap on the DOM during the big econ announcements - non-farm payroll, etc.

 

Other than that, the ZB usually has bids/asks 5 levels deep on the DOM. And if the ZB depth is not what you are looking for, the ZN has a ton of depth and volume, with the same $ movements per tick. I personally think the ZB moves more (could be a correlation of lesser volume) but the ZN is a great option as well. I like the ZF too, but less $ per tick so I usually place trades on the ZN or ZB.

 

Best thing to do is open up a DOM on Tues and see for yourself. OEC customers have access to this data for free, some other data providers will charge extra for it.

[brownsfan019 17]

Here's a few screenshots of the ZB dom taken last week:

 

 

 

 

 

 

The first one shows where you might see a 1 tick spread depending when you get your order on. That does happen during the day, but most times are pretty standard like the other 2 screenshots.

[brownsfan019 17]

There's a 3 yr note coming: http://www.cmegroup.com/trading/interest-rates/3-year-us-treasury-notes.html

 

So currently the 3 main ones are the ZB, ZN and ZF. This new note could add another market to trade if volume can grab onto it.

[jimbob42 10]

How many contacts do you trade normally?

This is an interesting thread.

thanks

[brownsfan019 17]

How many contacts do you trade normally?

This is an interesting thread.

thanks

 

Depends on a variety of factors.

 

[jimbob42 10]

Thanks.

That helps a bit

[jimbob42 10]

Just read your comments on the P/L thread. thanks

[brownsfan019 17]

No problem! In the p/l thread I'm trying to keep the trading to 1-2 contracts to watch the p/l closer on that account.

 

The nice thing about trading bonds is that you can trade 1 and still get some decent profit potential out of it IMO.

[jimbob42 10]

Excelllent

 

I was in the bond game for a number of years but just managing them and selling them.

The futures part of the game is still new and will be the next topic I tackle after getting a better understanding of stock index futures

thanks

[XDTrader 10]

Hi BF,

 

I have been enjoying your threads and would be grateful if you would post some charts of your bond set ups. That is if you wouldn't mind.

[brownsfan019 17]

Hi BF,

 

I have been enjoying your threads and would be grateful if you would post some charts of your bond set ups. That is if you wouldn't mind.

 

I look for action to occur at what I define as support/resistance areas. I'm basically looking to get in when big moves can occur.

[XDTrader 10]

Sounds like you keep it real simple. Do you look at volume charts, and if so what number volume bars?

 

I am assuming since this is in the candlestick forums that you look for specific candle patterns at the S/R?

[brownsfan019 17]

Sounds like you keep it real simple. Do you look at volume charts, and if so what number volume bars?

 

I am assuming since this is in the candlestick forums that you look for specific candle patterns at the S/R?

 

It's funny - in my head it's pretty simple. Now if someone that did not know what I was doing looked at my setups, they might think otherwise.

 

As you noted, I moderate the candlestick corner and a lot of what I use is right there. This part of the forums is not as active as the VSA guys and stuff, but that's probably b/c my stuff is straight forward and you can actually understand it the first time.

 

:rofl:

[lakai 10]

the /zb is one of the easiest things to trade. There are of course a few things to look out for and those things you will catch the more you trade it.

 

Here's a few setups that occur most of the time.

 

Equal Distance Trade

12 tick reversal (happens once a new low is broken most of the time)

6 tick reversal

50% retracements

 

Things to look out for.

Those 1000 lot orders on the dom, while most get pulled, some are real and they'll take everyone out and this happens at least once a day...

[Ronin 10]

Bond Market Fundamentals Long Term View:

 

The slow velocity of money will prevent inflationary times, even though the money supply is being dramatically increased, it largely is not being spent in the real economy. Printing excess dollars only matters if it trickles down to consumers who actually spend those dollars.

 

We are facing a period like 1874-94 USA, 1929-41 USA and 1998-2008 Japan -- all deflationary periods, as opposed to our relatively frequent normal business cycle recessions.

 

Therefore, deflation is the likely scenario over the next decade, not inflation.

 

The 30yr Bond will go up on Monday ( short covering rally ) before it goes down again when Ring Ting TIM ( Treasury Sec. ) opens his mouth again and barks, then the 3% 10 Yr yield willl be penetrated and violated.

[bathrobe 10]

Bond Market Fundamentals Long Term View:

 

The slow velocity of money will prevent inflationary times, even though the money supply is being dramatically increased, it largely is not being spent in the real economy. Printing excess dollars only matters if it trickles down to consumers who actually spend those dollars.

 

We are facing a period like 1874-94 USA, 1929-41 USA and 1998-2008 Japan -- all deflationary periods, as opposed to our relatively frequent normal business cycle recessions.

 

Therefore, deflation is the likely scenario over the next decade, not inflation.

 

The 30yr Bond will go up on Monday ( short covering rally ) before it goes down again when Ring Ting TIM ( Treasury Sec. ) opens his mouth again and barks, then the 3% 10 Yr yield willl be penetrated and violated.

 

Ronin, do you trade ZB using fundamental analysis?

[Ronin 10]

Bond Market Fundamentals Long Term View:

 

The slow velocity of money will prevent inflationary times, even though the money supply is being dramatically increased, it largely is not being spent in the real economy. Printing excess dollars only matters if it trickles down to consumers who actually spend those dollars.

 

We are facing a period like 1874-94 USA, 1929-41 USA and 1998-2008 Japan -- all deflationary periods, as opposed to our relatively frequent normal business cycle recessions.

 

Therefore, deflation is the likely scenario over the next decade, not inflation.

 

The 30yr Bond will go up on Monday ( short covering rally ) before it goes down again when Ring Ting TIM ( Treasury Sec. ) opens his mouth again and barks, then the 3% 10 Yr yield willl be penetrated and violated.

 

As expected the Bond Market goes up on Monday. :applaud:

[bathrobe 10]

Very nice call on bonds

[Ronin 10]

Bond Market Fundamentals Long Term View:

 

The slow velocity of money will prevent inflationary times, even though the money supply is being dramatically increased, it largely is not being spent in the real economy. Printing excess dollars only matters if it trickles down to consumers who actually spend those dollars.

 

We are facing a period like 1874-94 USA, 1929-41 USA and 1998-2008 Japan -- all deflationary periods, as opposed to our relatively frequent normal business cycle recessions.

 

Therefore, deflation is the likely scenario over the next decade, not inflation.

 

The 30yr Bond will go up on Monday ( short covering rally ) before it goes down again when Ring Ting TIM ( Treasury Sec. ) opens his mouth again and barks, then the 3% 10 Yr yield willl be penetrated and violated.

 

As expected, the 10 Year 3% Yield is penetrated after a short covering rally.

[enochbenjamin 10]

Can you expand on some of these set-ups?

 

thanks in advance.

enoch b.

 

the /zb is one of the easiest things to trade. There are of course a few things to look out for and those things you will catch the more you trade it.

 

Here's a few setups that occur most of the time.

 

Equal Distance Trade

12 tick reversal (happens once a new low is broken most of the time)

6 tick reversal

50% retracements

 

Things to look out for.

Those 1000 lot orders on the dom, while most get pulled, some are real and they'll take everyone out and this happens at least once a day...

[AbeSmith 10]

Thanks for the info Brownsfan. ZB looks great.

[brownsfan019 17]

Thanks for the info Brownsfan. ZB looks great.

 

One of my faves to trade Abe.

 

If that is too jumpy, also look at the ZN or ZF.

[AbeSmith 10]

One of my faves to trade Abe.

 

If that is too jumpy, also look at the ZN or ZF.

 

Thanks. I'll check them out. Actually I traded the TLT etf today, which appeared to be following closely the ZN. ZN is too expensive per tick for me and where I'm at with my trading currently, but I like the way it moves. How much is commission with ZB, ZN, and ZF? You might get cheaper commission if you trade the TLT with Inteactive Brokers. Less than $2 round trip for 700 shares I think, which would equal one ZB contract, both will move about $7 per tick, but probably lower commission with the etf.

 

That's how I trade the YM actually, through DIA etf, and pay less than $2 commission round trip, and get to lower my risk per tick as well.

Edited June 4, 2009 by AbeSmith

[brownsfan019 17]

Thanks. I'll check them out. Actually I traded the TLT etf today, which appeared to be following closely the ZN. ZN is too expensive per tick for me and where I'm at with my trading currently, but I like the way it moves. How much is commission with ZB, ZN, and ZF? You might get cheaper commission if you trade the TLT with Inteactive Brokers. Less than $2 round trip for 700 shares I think, which would equal one ZB contract, both will move about $7 per tick, but probably lower commission with the etf.

 

That's how I trade the YM actually, through DIA etf, and pay less than $2 commission round trip, and get to lower my risk per tick as well.

 

Commissions is one part of the equation.

 

Taxes are a HUGE part of the equation as well. You can't beat futures taxation (currently).

 

Also, 1 tick on the ZB or ZB is $15.625.

[AbeSmith 10]

Commissions is one part of the equation.

 

Taxes are a HUGE part of the equation as well. You can't beat futures taxation (currently).

 

Also, 1 tick on the ZB or ZB is $15.625.

 

Ok. What about electing MTM on the equities? Is it still better to stick with futures, with the lower commission of equities taken into account?