Trading 10 year or 30 year?

Hey everyone thanks for the info. BondTrader50 told me that the large bid and asks are the cause for the lack of volatility in the bonds. First what has caused these huge bids and offers? Second will it get better or eventually get worse and be even less volatile? And third will this eventually happen to the eminis? Also anybody have anymore thoughts on college degrees for trading interest rate futures?

Thanks Again for all the input.
 
Those guys speaking about lack of volatility on bonds apparently doesn't have a clue about what this is about.

With the allowed leverage on bond fut 1 day like yesterday can blow up an account entirely.
An bond futures usually react more to economic indicators than any other market (like equities or forex).

The bad thing is that is not as much quick as another kind of markets (I.e. equity index fut markets) but you have less slippage guaranteed and good fills at anytime.
 
Hey everyone I finally started trading the 30 year bond futures. I have to say that I am a little disappointed though. The bids and asks are so huge that I can never get filled. This is the only market that seems to have this problem on every other market I can trade the bid/offer spread and get filled usually very quickly. But with the bonds it seems to take forever to get filled and then try to cover. They will just sit there on the bid or offer and trade thousands of contracts until the market moves to the other side and then it will just sit there and do the same. I hear that the bund and the bobl have the same problem. I just don't see how people can make any money spreading these things. I have heard that its the computers and automated trading systems that are doing this.

Is this the "beginning of the end" as one eurex trader put it for the scalp spreading stratagy? Or will these computers eventually be regulated by the exchanges or all blow up by increasing competion from other automated systems and us spreaders will thrive once again on markets like the treasuries? Or do you all think that I should try to change my stratagy and trade solely off of the news or some other stratagy?

Any info you could give me on the subject would be great because I seem to be at a brick wall hear.
 
Quote from youngtrader:

Hey everyone I finally started trading the 30 year bond futures. I have to say that I am a little disappointed though. The bids and asks are so huge that I can never get filled. This is the only market that seems to have this problem on every other market I can trade the bid/offer spread and get filled usually very quickly. But with the bonds it seems to take forever to get filled and then try to cover. They will just sit there on the bid or offer and trade thousands of contracts until the market moves to the other side and then it will just sit there and do the same. I hear that the bund and the bobl have the same problem. I just don't see how people can make any money spreading these things. I have heard that its the computers and automated trading systems that are doing this.

Is this the "beginning of the end" as one eurex trader put it for the scalp spreading strategy? Or will these computers eventually be regulated by the exchanges or all blow up by increasing competion from other automated systems and us spreaders will thrive once again on markets like the treasuries? Or do you all think that I should try to change my strategy and trade solely off of the news or some other strategy?

Any info you could give me on the subject would be great because I seem to be at a brick wall hear.
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somebody above already suggested that b/o scalping is not a game for retail. You will be always filled as the last one because of FIFO method; unless you are setting up orders continually during the day and keep them overnight.
This means that immediately after you get filled the price will move <i>against</i> you. I suggest you go with Surdo advice, i.e. take 1 contract on the book and see how it behaves.

With respect to school I don't think it matters much for scalping. For prop it is an entirely different story - you should know as much about theoretical economics and geopolitics as possible.
 
Quote from youngtrader:

Or will these computers eventually be regulated by the exchanges or all blow up by increasing competion from other automated systems and us spreaders will thrive once again on markets like the treasuries?
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I see no reason the exchanges will regulate automated trading. I (and most screen traders) happen to like that there are 1000s of contracts available at the bid and ask, and the spread is one tick wide.

The problem with bid/ask scalping is that it's so easy, a simple computer program can do it and probably much more effectively than a human in the pit could. Spreading off risk against back months, using the swaps market to offset convexity--it's all so much easier to do automatically.

I agree with dhpar--if you're going to prop trade, get a degree in economics. Otherwise, a degree is irrelevant if you're simply scalping. Math/Statistics should be your focus if you want to go the quant route.

Let's face it, bid/ask scalpers are dead. Computers do that job just fine and they aren't going away.
 
Ok, Ok I know now that my system is on its way out fairly quickly. But really besides the initial big economic report the bonds pretty much trade in a straight line the rest of the day. How do you day traders make money in the bonds if there is vertually no volatility after the first few hours of trading? Will this low volatility change and eventually the bonds will be full of day traders, if so what will be the event that causes the return of all day volatility to the market?
 
Quote from youngtrader:

Ok, Ok I know now that my system is on its way out fairly quickly. But really besides the initial big economic report the bonds pretty much trade in a straight line the rest of the day. How do you day traders make money in the bonds if there is vertually no volatility after the first few hours of trading? Will this low volatility change and eventually the bonds will be full of day traders, if so what will be the event that causes the return of all day volatility to the market?
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<i>chauncey1</i> already mentioned that you don't make money on volatility alone but rather on volatility times leverage. Therefore you can tune your risk appetite as you wish.
It is true that volatility is low and decreasing in the past few years but that is true in equities as well.
 
As someone who has watched the 10yr order book non-stop for the last 4 years or so I will try to impart some advice on this subject. First of all, you should really watch the time and sales prints. These are very valuable in a few aspects. It will allow you to see which part of the curve the paper is giving up most edge. We are talking big orders in one print (1000+ lots in 30yr, 3000 to 7500 lots in 10yr, 3000-5000 lots in 5yr, and 5000+ lots in the 2yr). Once you can figure if paper is say giving up huge edge lifting offers in the 2yr you probably want to be getting long the market (trying to get filled on 10yr bids below if lucky) or playing a steepener throughout the day (by jumping on back of strong 2yr buyers). Obviously you can reapply this back and forth many ways across the curve. But most importantly find where the paper is giving up edge. Second, if there is no paper whatsoever on the whole curve watch for Hardy Brumfield and a few other monster 10yr outright locals to push through levels. If there is some Market Profile or volume only support/resistance level out there that sticks out like a sore thumb on a chart they will try to push for stops around it about 99.99% of the time. This is easily done because over a 30 minute period without paper some of these guys can put on a position equivalent to the banks and then get out of it if they hit enough retail stops. Finally, try to get a hold of some dealer commentary (maybe through a friend or something) as they describe how their customers and themselves are positioned into various data releases.
 
Quote from mcurto:


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But most importantly find where the paper is giving up edge.
[...]
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I traded exclusively off-screen so I never saw a floor but I know the mantra that usually pit traders learn: 'don't lose your edge' (since they are able to buy on the bid and sell on the offer).

But on the screen context I'm not able to catch your reasoning re: the paper.

Are you willing to share with us how to see the paper on screen?

Thanks for your time,
Bernard
 
Sorry for not getting back right away. I ASSUME that most large orders that I described in the previous post are paper when they have a flow to them, especially when those big orders appear to be rushed and not worked to obtain best price levels. Yes, there are some huge locals that can probably trade 5000 lots, but they will generally be in and out of that trade within minutes. I am talking about more along the lines of a fund that comes in and bangs out 20,000 notes in 2500 lot increments. Those are the trades you want to search out.
 
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