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Posted: 11 Jun 07

Imagine a trade which could :

Enable you to take advantage of the excessive volatility.

Enable you to take advantage eneficiencies of a huge sell off in the bond market, Giving you entry points, exit points, reasons to sell , reasons to buy, signals to exit the trade.

Numerous indicators to follow to give you entry points, exit points, reasons to sell, reasons to buy, signals to exit the trade.

Take advantage of price anomolies accurately.

Enable you to trade the curve, effectively, cost efficiently and in a controlled manner.

Take advantage of independent orders hitting seperate products, and enabling you to price those contracts accurately.

Enable you to trade a product that enables you to scale up your size if you gain confidence.

Enable you synthetically create curve strategies without having to give away half tic in the spread matrix.

Enable you to trade a product which didnt alter the risk parameters of your business.

would be interesting wouldnt it.

Good luck

1 comment

REVENGE OF THE BEAR

Posted: 11 Jun 07

Sitting from the stands it’s easy for me to pass comment on the market.

1. Quite clearly the Bond market had mispriced the Curve and more accurately mispriced the Long end of the curve.

2. A lot of traders are viewing these moves as hugely volatile, and viewing spreads levels as anomalies. They need to change their perspective immediately. In hindsight, the anomaly they should be referring to, was the last 6 months curve / price action.

3. Remember this market is trading on momentum and fundamentals. Be very careful of technical analysis signals.

STRATEGY

1. Understand the long term significance of the Markets moves.

2. Understand the bond market and the stock are not moving inversely. Understand why?

3. Understand What is driving this market Fundamentally.

4. Understand the ramifications on your part of the curve from this fundamental shift.

5. Develop new strategies to take advantage of the volatility and inefficiencies. Not trade from the back foot all day.

6. Develop strategies that are suitable given the market’s volatility.

7. Understand what could turn this market Bullish / Bearish and the immediate effects on your spreads.

8. If trading STIRS look at the price of the contracts inversely, ( 100-price) write down some levels on a piece of paper that you feel based on the 3mth deposit rate are important in EACH CONTRACT. Then use this to help you form some sort of ranges of your flies and condors.

9. Trade strategies that you can control the risk effectively, that can harness the inefficiencies.

10. Spend time on this list. It WILL make/save you a lot of money.

I keep banging on about it.

look at the Eurodollars vs treasuries.

look at the euribor vs EGB's

Good luck

0 comments

PERCEPTION IS EVERYTHING

Posted: 04 Feb 07

Develop good strategy trading volatile markets.

"do i see a yield curve?" - return of the day trader part 2

For those betting on the return of the yield curve you finally may get your way. Despite that bet taking 2 1/2 years and a whole load of trading dollars later.

Pretty much every curve has steepened aggressively in the last 2 weeks. We have seen levels in the z7/z8 eurodollars which we have not seen in 7 months, and dare i say it we have the makings of a yield curve forming!! ( watch this space).

lets make it simple for everyone. ALOT of so called gurus have been carried out on their medium term bets on the FED's next rate cycle. BIG TIME.

I have not told you this to make you feel better that they have lost more than you.

With the correct approach, correct strategies and correct execution we may, dare i say it, see the return of the interest rate DAY TRADER !!!

Basically, If we are in for a continued period of volatility, and only time will tell, we have to start ignoring our 'pre set' ranges , and start to focus on 'momentum'.

With volatility/momentum comes market inneficiencies,trading opportunities, comes profit.

Hopefully you are asking yourself, How do i make good decisions? What strategies should i be implementing in the current volatility/yield curve shape? I havent seen this type of price action before, How do i capitalise?

Rule no 1. has to be survival.

Rule no 2. the bloomberg/cqg that sits next to you, USE IT! ( if you have no idea what hit you, or even you made money but wanted some clarification as to how you did it. start running through the spreads you trade and how they reacted over the last few days, then do the same for the spreads around them and how they reacted. ) IE gain some perspective.

Rule no 3. Build yourself a trading plan for the day, break it down into 2 parts if you have to . But get your self a plan. I don’t mean start saying i will buy the xyz spread at 4, i am talking about preparation for the day. HOW WILL YOU REACT IF SOMETHING HAPPENS? MAKE GOOD DECISIONS!

Rule no 4. Markets can and will surprise you more times than you've had hot dinners. The old saying "there is no way 2/5 would be trading 30!! it should be lower “ WILL GET YOU A QUICK PASS DOWN TO THE RISK MANAGER.”

Rule no 5. Don’t be too biased in your trading!

Rule no 6. Enjoy your trading!

Good luck

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