Eurodollar Futures (GE)--anyone else trading these?

[dunleggin]

Quote from trdinglife:

...ED futures seem to be perpetually in disbelief that this may actually happen relatively quickly...

Last year I did some work on how well since 1994 the price of the ED contract nine months ahead predicted the Fed Funds rate that prevailed at expiry. The conclusion was 'poorly' - the error was a mean of about 60bps in both directions.

However, empirically it seems that recently the track record is better, presumably because of the Fed's greater openness about their thinking.

I share your thought about Greenspan's intention/agenda in making those remarks, and whether given the context it's right to apply them without modification to the money markets here.

 

[dunleggin]

Quote from FredBloggs:


does anyone subscribe to mrci (moore)?

i was wondering if there is anything seasonal around this time?

The ET poster ' -ooO-(GoldTrade' promotes mrci's stuff.

Not a spread, but Thanksgiving seaonals in the 10yr. have been quite reliable, selling on Tuesday's close and covering on Monday..

Trading 'the turn' in the ED's is no longer worthwhile, according to most recent research, so beware of that.

TheZ5/Z6 cal. might be a useful 'tell' for a bottoming in the ED spreads - Z5 has been following the short-end while Z6 has followed the notes

 

[FredBloggs]

Quote from dunleggin:

The ET poster ' -ooO-(GoldTrade' promotes mrci's stuff.

Not a spread, but Thanksgiving seaonals in the 10yr. have been quite reliable, selling on Tuesday's close and covering on Monday..

Trading 'the turn' in the ED's is no longer worthwhile, according to most recent research, so beware of that.

TheZ5/Z6 cal. might be a useful 'tell' for a bottoming in the ED spreads - Z5 has been following the short-end while Z6 has followed the notes

cheers dunleggin.

i'll take a look at that one.

ive recently been playing round (losing) with trying to trade an abnormality in the ed implied yield curve - taking the daily closes across the front 8 months and looking at the curve for any kinks, trading a spread based on the kink ironing itself out.

not too successful to be honest as the kink tends to propagate along the curve on the following days - suggesting a kink is a potential shift in the valuation rather than an anomaly.

the kinks tend to occur in the mid months (u5, z5, h6) months and then propagate to the ends/tails.

obviously i should reverse what im doing now!! take a bull spread when my brain tells me to take a bear spread.

anyone else have experience with this kinda stuff? looking at the other interest rates is an obvious start -ive just been making decisions purely off the ed pricing (i guess this mentality comes from trading index futures - id only consider and look at what i was trading and ignore the cash or other indices)

cheers

 

[sle]

Quote from FredBloggs:

the kinks tend to occur in the mid months (u5, z5, h6) months and then propagate to the ends/tails.

the "long turn" is not a good trade anymore, since the fed has been really washing the market over the turn weekend. i'd avoid going short too, since if it'll rain, it will pour.

 

[dunleggin]

Quote from FredBloggs:


ive recently been playing round (losing) with trying to trade an abnormality in the ed implied yield curve - taking the daily closes across the front 8 months and looking at the curve for any kinks, trading a spread based on the kink ironing itself out.

looking at the other interest rates is an obvious start -ive just been making decisions purely off the ed pricing

A year or so ago I was at a similar stage. I'd found simplistic strategies that were profitable, but was seduced by the concepts of PCA and butterfly pricing. I had mixed results with the curvature, and realised that a little knowledge can be damaging to the P&L, not least from the commissions

Looking at the other rates - FF, TU and FV - is fertile ground for giving you some notion of rich or cheap, as well as trades. Spreads against spreads can be another. One tentative conclusion I've reached is that structural behaviours in the market are a starting point.

 

[FredBloggs]

Quote from dunleggin:

A year or so ago I was at a similar stage. I'd found simplistic strategies that were profitable, but was seduced by the concepts of PCA and butterfly pricing. I had mixed results with the curvature, and realized that a little knowledge can be damaging to the P&L, not least from the commissions

Looking at the other rates - FF, TU and FV - is fertile ground for giving you some notion of rich or cheap, as well as trades. Spreads against spreads can be another. One tentative conclusion I've reached is that structural behaviours in the market are a starting point.

cheers - Ill take that on board.

to date my strategy has been very simple:

(note - this is when Im not trading anomalies as posted above)

I get the direction from the weekly chart, then, on the daily chart, I enter as a pullback begins to correct - closing the trade with profit or loss as soon as the trade falls below the last correction.

I base all trades on the close only.

Trades are either very quick (2 days) or VERY long when the trend persists.


like u say - simple is good and getting too clever can be a damaging thing!!!


If I trade this mechanically I get a win rate of 60%. If I add some common sense I can get it up to 70%. When the trade trends, boy does it go - which is why I thing ge is such a great market.

Hopefully, with your advise and the rest of this thread 80%????

 

[trdinglife]

Quote from dunleggin:

Merely to illustrate that not everyone buys into the fascination with an academic notion of real rates based on historic averages. [/B]

these are all good points made by very smart individuals...and really what I should have said was that 'most' governors and fed watchers have used the 3-5% mark as an unofficial target...it is true that some believe that historical 'neutral' rates do not have the same relevance in our post 9/11; post pseudo-recession world; post 'increased productivity' world. However, while the timing and as such the pace of increasing rates may be under question, the fact remains that without any further shocks to the system, the U.S. cannot maintain what is widely recognized as 'emergency' rate levels...the economy, despite the ridiculous 'twin deficits' (I know I hate to be added to the long list of economic neophytes who refer to this), can withstand higher rates and may in fact benefit from them in the sense that higher inflation would be discouraged (not that there is necessarily a problem with inflation...yet! see latest cpi)
...and to your final comments about the reliability of the ED to forecast future rates, this may be more to do with Fed transparency than anything else...and I always thought they called the bond market the 'smart money'...lol!

 

[Stratcat]

Quote from FredBloggs:

cheers - Ill take that on board.

to date my strategy has been very simple:

I get the direction from the weekly chart, then, on the daily chart, I enter as a pullback begins to correct - closing the trade with profit or loss as soon as the trade falls below the last correction.

I base all trades on the close only.

Trades are either very quick (2 days) or VERY long when the trend persists.


like u say - simple is good and getting too clever can be a damaging thing!!!


If I trade this mechanically I get a win rate of 60%. If I add some common sense I can get it up to 70%. When the trade trends, boy does it go - which is why I thing ge is such a great market.

Hopefully, with your advise and the rest of this thread 80%????

Do you think that this strategy can be translated to a shorter timeframe, but based on the same principles. EG, holding trades for minutes-hours? Thanks

 

[FredBloggs]

Quote from Stratcat:

Do you think that this strategy can be translated to a shorter timeframe, but based on the same principles. EG, holding trades for minutes-hours? Thanks

good question.

maybe the 60 min time frames but not really less imo. to bee honest ive never tried though - pull up some charts and see what u think. from what i see youd probably have to set a tick target and keep your 'out levels' pretty wide. reports may kill you - all depends on how u manage your exposure. if it looks cool give it a pop - nothing ventured......

not a big fan of backtesting, but i looked at the weekly time frame and the results just dont seem to be as good (also i dont think i could hold any interest waiting for the weekly charts) the daily chart gives me enough entries while i trade other stuff intraday.

a lot of guys do trade ge spreads intraday - but i gather they just go to scalp a tick or 2 if lucky - from what i know of this strategy charts are not used much. also a proper set up is needed (direct connection, cqg, xtrader etc - not for lil ol me sat at home on my jack jones)

others on this thread probably have more of an idea on how to do this intraday.

im trying to go for a trend in the spread over as long a time as poss. i keep entering as the trend starts to correct and perhaps taking a few small hits on every close if it chops back to the entry (more frequest recently) - then 1 day BANG! the trend kicks off and im just sitting there watching my profits grow every night! No economics or fundamentals involved - just looking at the spread chart. the intraday trend just doesnt seem as persistent to me.

 

[Stratcat]

Hi, thanks for the response.

I've been trading ED for a couple of months at my prop firm. No-one I know really trades spreads, just try and get on the outright moves. I have CQG, Xtrader, etc so entry and exits are instant and news events and figures although dangerous are often huge opportunities also.

I have only really been successful by getting in and out of the fluctuations for a couple of ticks each time, getting out for a loss if I went 1 or 2 ticks offside. The results have been slow and steady but also suffering the odd big down day when I get cut to bits in a choppy market. I have always wanted to trade the larger moves as this is the only way to eventually trade massive size and survive with a low hit rate. Whenever I've tried to trade like this though I have always ended up taking big losses.

EG. I had a level at 54.5 in Dec 05 ED on Thursday as the market was coming off I waited until it was going through this level and joined the bid. I got filled and the market stabilised around here. It then went up to 57.5 and I could have taken a 6 tick profit on a 100 lot. Instead I thought it would go further and I was surprised when it came off once again. I ended up scratching the trade and going short at the same time just before the market turns round once again and goes to 59. I paid up at 55.5 I think so I turned a nice little earner into loss and the next day the market went to my target of 60.

This is a snapshot and typical example of how whenever I have tried to run a trade I get my arse handed to me. Maybe it is not a viable strategy for a daytrader who has to get out of his trades by the end of the day.

Anyway food for thought. interestingly enough it then bounced of my 60 level and went 40 ticks the other way on the back of Greenspan, lol. I suppose there is always a tradeoff between developing a method where you are right very often for a short gain, or right now and again for a big gain.