Questions on Trading ZN

J

JangoFolly

I just started following the ZN this week (I usually trade YM or ER2). What are some indicators or indices that tend to be positively or negatively correlated to price movement in the treasury futures (similar to how one might use tick, trin, and stock indices in trading stock-related issues)? Any other general advice with respect to trading this particular market would be greatly appreciated. Also, my impression is that the 10 year is more suitable for intraday than the 2 or 5 year -- is this accurate?

Thank you.


Regards,
 
A lot of CBOT floor guys use Market Profile to trade the interest rate products. Other than that there aren't a ton of guys using technical analysis, although some use hardcore technician on Mike Riordan (Focus Trading or something like that, think he has a website).

For the most part you might want to know what Hardy Brumfield is doing since he trades about 20% of the ZN volume on any given day. Like today, absolutely nothing going on this afternoon, he decides to get short 1500 in the pit from 113-04 to 113-03, and all of a sudden he pushes us into the lows selling size on the screen also. The biggest trades down there trade mostly on fundamentals.

I would stick to the Ten-year note, mostly yield curve spreaders trading in the twos and fives. The 30-year bond is often its own animal and at this point its easy to get run over because its not as liquid most of the time. PM me if you have any more questions.
 
Quote from mcurto:

A lot of CBOT floor guys use Market Profile to trade the interest rate products. Other than that there aren't a ton of guys using technical analysis, although some use hardcore technician on Mike Riordan (Focus Trading or something like that, think he has a website).

For the most part you might want to know what Hardy Brumfield is doing since he trades about 20% of the ZN volume on any given day. Like today, absolutely nothing going on this afternoon, he decides to get short 1500 in the pit from 113-04 to 113-03, and all of a sudden he pushes us into the lows selling size on the screen also. The biggest trades down there trade mostly on fundamentals.

I would stick to the Ten-year note, mostly yield curve spreaders trading in the twos and fives. The 30-year bond is often its own animal and at this point its easy to get run over because its not as liquid most of the time. PM me if you have any more questions.
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So you do not reccomend trading the ZN with technicals? I have been backtesting some signals for the past couple months or so and I have found there to be decent trends with good signals being generated. I like the ZN because it does not move at a lightening pace and has very good volume.
 
Quote from badvlad:

Look at 10 year cash in order to determine what future will do. Also, you can use FIT or NOB as a guide
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Do you know what the ticker is for the 10 year cash on Interactive Brokers?

Can you explain what FIT and NOB are?

Thanks!
 
I do not know what is a ticker for 10 year cash on interactive brokers.

there are 2 kinds of FITs and NOBs. One group is futures-futures and other is cash-futures. I this case, one you need is future-future:

FIT: Five Year Future vs 10 Year Futures. Usual trading ratio is 3:2. Thus, for every 3 Fives you need to hedge with 2 Ten years. Thus, for every 10 Futures half-ticks 10 Year Move, Five should move by 6.66 half-ticks ticks. Thus, if FIT is becoming more negative, either 5 is breaking faster then 10 year, or 10 year is on a major rally. This all works against net changes versus a previous day. Thus, strength equation is 5YearNetChange-2/3TenYearNetchange

NOB: 10 Year Future vs 30 Year Future. Usual trading ratio is 5 to 3. strength equation is 10YearNetChange-0.6*30NetChange. See FIT explanation regarding behavior.

These are tricky trades, especially when there is a "squeeze" going on on the 10 Year cash and very hard to execute in efficient manner without autospreaders. Trust me, I know that first hand.
 
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