The top 3 guys who make over 1 million a year at my firm...

[s0mmi]

Quote from londonkid:

Hey Sommi

Thanks for sharing. I am involved with some Eurex spreading and I am interested in taking a look at this US 10s versus Ozzie 10s. What is the most popular ratio for your people to trade it intraday?

Thanks

londonkid

The ratio is about 10 aussies to 11 tnotes right now.

It is changing as the Aussie dollar seems to be very prone to a collapse over the next 6 months. In which case it will eventually become 10 to 10, then 10 to 9 (if it breaks under 80c etc.)

The aussies are quoted very simply. 1 basis point move = 2 aussie ticks = ~4.5 U.S. tnote ticks (we just say 5 to round it off)

 

[kkfx]

Hi Sommi,

Just a query.....do you take the correlations into account for cross exchange synthetic pairs like ZN vs 10Yr austalian note?...The last 2 yrs correlation between these 2 instruments appears to be around 57% and 66% over last 5 years (source: CSIdata)...is it a good pair to trade with such correlation?

 

[s0mmi]

Quote from kkfx:

Hi Sommi,

Just a query.....do you take the correlations into account for cross exchange synthetic pairs like ZN vs 10Yr austalian note?...The last 2 yrs correlation between these 2 instruments appears to be around 57% and 66% over last 5 years (source: CSIdata)...is it a good pair to trade with such correlation?

>> Yeah see you're taking a heavily statistical approach. No-body at my firm does that.

>> 95% of spreading occurs during the EUropean + U.S. time zone because the Australian 'night session' market opens up to allow for hedging and business to be done in sync with international markets.

Open up a chart between the Aussie XT and the U.S. ZN between the Aussie night open up until the U.S. cash close. That's basically all of the European + U.S. time session. You'll find a much higher correlation.

>> Also it's a very rigid product. Fills are of the essence. Its not a market where someone comes in and just insanely wacks the Aussie bond market one way unfortunately. Its very tight and its pretty saturated but its reliable, you can get consistent on it, you can hold through all European + U.S. figures, and its extremely good to get started on

>> Its what I started on. I went from failing to succeeding just by doing it every single night and taking very minimal scalp profits

Good luck. There's definitely money there. Im always willing to dab in it!

 

[londonkid]

Quote from s0mmi:

The ratio is about 10 aussies to 11 tnotes right now.

It is changing as the Aussie dollar seems to be very prone to a collapse over the next 6 months. In which case it will eventually become 10 to 10, then 10 to 9 (if it breaks under 80c etc.)

The aussies are quoted very simply. 1 basis point move = 2 aussie ticks = ~4.5 U.S. tnote ticks (we just say 5 to round it off)

thanks for confirming dude.

GTTY

 

[londonkid]

Quote from kkfx:

Hi Sommi,

Just a query.....do you take the correlations into account for cross exchange synthetic pairs like ZN vs 10Yr austalian note?...The last 2 yrs correlation between these 2 instruments appears to be around 57% and 66% over last 5 years (source: CSIdata)...is it a good pair to trade with such correlation?

Hey kkfx

I see a lot of people talk about correlation when I am wondering if they actually should be looking for co-integration. See diagram attached. Blue and Red are very correlated but they are diverging not converging. For the habitual faders amongst us I tend to look for v.high co-integration.

just my 2c.

london

 

[kkfx]

Thanks Sommi for the reply.....I will check the correlation during US+ european session. There are some spreads like RBOB-WTI crack, WTI-brent which have low correlation but still they are exchange-traded spreads, for commercial purposes.

@Londonkid

Agree with you, cointegration is equally important.
To my understanding,
High correlation >90, high cointegration >95 -----look for mean reversion trades
High correlation, low cointegration --- look for divergence trades

I have a spreadsheet to calculate cointegration but not used it much. Do you have any easier method for that?...and how do you use cointegration for trade decisions?

 

[syswizard]

>>
Prop firms in the discretionary manner is all I know. I don't know anything about the Quant firms. But all I know is, infront of my eyes, there are multi multi multi multi millionaire guys who compute NO models, NO variables, NO statistical modelling, NO back testing, and still make money and have for years and years and years and years.

That's because they've got TALENT and DISCIPLINE. They have razor sharp intuition honed from thousands of hours of trading and they have learned how to control their emotions.
Not many have these attributes. Not everyone can become a Tom Brady or other sports super-star. And more importantly, putting your time in does not guarantee success. For instance, this guy has been doing it for over 3 years now. He's smart, well-educated, has had much screen-time and trading time, but he JUST DOESN'T HAVE "IT".
http://mbagearhead.blogspot.com/
We are now BEGGING him to quit....and get a "Real Job" where he can make some money. He's not getting any by trading.

 

[Pigsky]

Oh wow I remember seeing that mba guy's site a year or more ago when I started an intrest in day trading. So sad that he is still at it. From what I have seen there is no talking his type out of it. I once saw people continue to follow a guru even after he was proven a con artist. Like an addict they probably wont stop without an intervention by family/friends or run out of money and go bankrupt.

 

[jnbadger]

I once saw people continue to follow a guru even after he was proven a con artist. Like an addict they probably wont stop without an intervention by family/friends or run out of money and go bankrupt.

That is just sad. I guess some people just need their hand held forever, no matter who is doing the holding.

 

[Trayo]

OP, thanks for sharing what you have learned, much appreciated.
What you written has taken a lot time and thought.

You mentioned that for an outrighter, that he can at very least use use "spreading" to help time trades. This is good advice.
Use the benefit of being able to look at a similar instrument and discern how one's trading instrument is stretched or not at the moment in comparison.

Best Wishes