Try symbol GE for eurodollars -- Globex eurodollars. Don't use ED. Sentiment, I use some quantifiable data, but for the most part it's more subjective. It's important for me at least to have a well-developed grand historical view, and look for most likely candidates for reality, the big realities. I'm one of those poor souls who can't help but wonder about questions like what the hell we're doing here on this planet on at least a daily basis, so big picture questions come naturally and constantly in my particular case. Of course I don't know what's really going on in the markets with any certainty, so I try to develop possible scenarios. Then I look for areas where the market has overdone it somewhere, gone beyond what seems likely or reasonable, or else not yet paid attention, or is starting to pay attention. I like to use seasonal tendencies when possible. I try to have a grasp on the fundamental factors, but to avoid getting hung up on this or that single data point, and I pay attention to several markets and their interactions. I get the sense of the market's bias by price and by what I read/see in the media, from gurus, in the FT, on TV even, and then in a lot of blogs I read such as economists' blogs. I look for divergent views, for example the inflation/deflation arguments going on (with me siding on the deflationist view for the nearer term). This doesn't always end up in a counter-trend or contrarian play. And whether I'm "right" or "wrong," my hypotheses give me a framework, and something to try to falsify and test. For me, they make the charts spring to life. I tend to assume that no one is right, including myself. I aim overall to be less wrong... I'll even trade against what I think is a long term direction. And I change my views a lot, or rather refine them. But the long-term views have held up well. These kinds of things are highly subjective and discretionary. So technical analysis and tactical money management structure the chaos. Most important for this part of my trades is really trying to understand things on my own with my own ideas. Also financial and economic history is a great help here. And I find that strange as it may sound, reading philosophy like Kant for example has really helped me. Luckily I also have a strong musical/artistic and, though less, an athletic side, and these help me I think with charts, with "feeling" the market/reading the tape, so shorter term stuff. I absolutely adore ping-pong... My bad side is math. I think I have an ability, I mean I had nice SAT scores, but I've never developed it. I've learned, again knock on wood, to make overall successful longer term trades, and generally successful shorter-term trades. My weakness is taking profits too soon, often by trailing a stop too close. My challenge now is to integrate short and long-term trading, and do it in a way that can suit smaller account sizes. Also sometimes I wait for too much confirmation and end up missing trades. Last night for example I was interested in going short eurodollars but missed by being unwilling to place the order before the PPI and CPI release... Missing trades has become a problem, actually. So I'm starting to try stop-limits to open instead of my customary limit orders. We'll see how it goes. A lot of my best trades just "come to me" in a flash of intuition, or else they are the execution of strategies I dreamed up once upon a time and now see an opportunity to deploy. Anyway, sorry about the long-winded reply, should you have made it this far... What were we talking about? Hehe... Oh, and about the many vagaries of bond analysis and pricing, I have a lot to learn... And a lot to learn on so many areas. Hard sometimes to know which are most important. But transforming eurodollar prices into something more accurate? Sure, I'd give it a try.
OK so you trade on your interest rate outlook. One problem I see with fron end of the curve is that since it's mostly Fed and Fed expectations driven you are at the mercy of govt intervention. But recently it has been the case in the long end too. However openmarket actions are more like FX interventions, fed fund moves are not reversed by the market. If you exit too soon, maybe you should scale out.
I use http://www.brocompany.com (MT4 based broker) for CFD trading, you can trade as small as 0.01 lots of most futures with exchange spread. They charge $10 per round trip for all contracts ($0.10 for 0.01 lot)
Sounds great but I never heardof the company and their site is not accessible with IE 6 , freezes this computer .
Stock symbol DUC Duff & Phelps Utility & Corporate Bond Trust Price behavior of DUC might correlate with bond prices. Bigcharts.com price graph begins year 1993, so maybe there is about 16 years of historical price data to analyze.
While learning more about bonds and doing some research to build a portfolio, I stumbled on several issues and questions that took me some time to answer. However I still don't understand a major aspect of bonds: what makes a bond undervalued ? I thought I read a liitle on bonds but nowhere , even on Google, did I see anything to answer that question. I thought to be undervalued it had to trade under what its present value should be. But then I read the discount rate used is the YTM . Thus the market price is always the present value ? IOW Can a bond trade under its present value or is the present value by definition the market price ? Then how do you define an undervalued bond? It appears managers look at their rate outlook and economic outlook to determine where bonds or a bond should trade. That sounds very subjective as an investment approach.
The PV of the bond is, by definition, its mkt price. Which means that, yes, "undervalued" is subjective and is normally used to denote a bond that trades too cheap vs some sort of a model/view. It doesn't necessarily have to be an explicit view on macro/rates. Sometimes it has to do with the bond having some idiosyncratic cheapness as compared to other, nearby bonds. Or maybe it's undervalued vs the swap curve. In general, there's a whole variety or under/over-valuation measures one could come up with and that's relative value trading is sorta all about.
OK thanks, the explanations of bond PV I found were confusing, some talking about the "appropriate " rate to be determined according to duration and spread others talking about YTM being the discount rate. I guess when you hear talking heads saying bonds are undervalued you just have to take their word for it and take the plunge like I should have done last october, I thought defaults were only getting started. And what's the deal with the swap curve being the risk free rate ? Isn't the use of swap rates as the risk free rate a European thing (since there are no single "risk free rate")?
Well, things are sorta in flux in this area. Partly it's sorta easier to use a swap curve, because the trsy curve is a bit of a pain to build, especially these days. Secondly, swap curves are smooth by construction which makes them a useful common denominator for calculation of various bond spread measures, such as OAS and others. Finally, looking at the swap curve is helpful to get a universal sense of the bond funding, i.e. the carry. In general, depending on the nature of your funding, some sort of a swap curve is actually a more sensible risk-free rate. These days, however, there's a wholesale shift from LIBOR swaps to OIS, which is more commonly used as a funding basis.