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Discussion in 'Financial Futures' started by gaussian, Dec 17, 2018.

1. ### gaussian

I'm struggling to grasp how people are speculating on these. Obviously I could approach it via technical analysis but being more quantitative I would like to learn how to trade these a little bit more mathematically. I know very little about bond trading right now.

I understand there are various spreads though I don't understand how to trade them very well. I picked up The Treasury Bond Basis in hopes of learning more about this fascinating market. As a retail investor is the Treasury Bond Basis book a good starting point to leap into trading these instruments or am I wasting my time and I should go back to more TA/traditional ways of analyzing these? If anyone has any other books as well I'd like to know more.

Thanks!

2. ### fordewind

By clicking on a mouse

3. ### fube

Edit: Also, just to specify a little about trading the yield curve: You can trade it whether you think it's steepening or flattening. Check out this very informative mini guide from CME.
But if you're starting out, I would suggest trading the outright futures contracts, such as ZB/ZN.

wlnd likes this.
4. ### gaussian

Thank you for the reply. Do you have any opinion on the book I posted? Also, do you find trading the outright to be more technical or fundamental?

5. ### fube

To be honest, I remember coming across that book before, and from what I remember, I think it was more academic-leaning. As in equations, understanding the math behind yields etc. Which for a day trader wouldn't provide much edge or value (I think). You'll want to understand broader themes such as what moves the rates, what would lead the feds to think it's a good idea to hike rates, etc. The math behind it renders somewhat unhelpful if you're day trading the outright (At most you can maybe give yourself the satisfaction of understanding how the future contract for the ZB is priced and why the \$ per tick is \$31.25, etc).
As to your second question, I think it can be both. It depends on how you want to use it. Same can be said of stocks. Some people trade stocks strictly technically, others trade the fundamentals.
If you want to day trade the outright (let's say ZB) then the technicals should be prioritized. Knowing the fundamentals gives you more context, but the real, and arguably only, important "intraday" fundamental would be the day of FOMC speech, which is, I believe, the only important "intraday" fundamental when it occurs during the 6(?) times per year. Other than that, implementing fundamentals only for day trading ZB wouldn't be too helpful I think. You can just keep certain things in mind like: 1. Ok sentiment is rates going up. 2. Inflation is going to X, 3. Generally the sentiment for the fundamentals is bearish. But the thing is that these instruments (ZB, ZN, ZT, ZF, etc) move relatively slowly intraday and are typically directional, so technicals will provide you with more edge in that respect. If you swing it, then both technicals and fundamentals are critical. So depends on your style of trading.

wlnd likes this.
6. ### Overnight

(NSFW)

Or clicking on little mouse balls.

Haha, sorry, it is the holiday, and I am feeling loopy.

7. ### Kevin Schmit

Yes, it is an excellent book, but a difficult read. It might be a bit dated -- it's been around at least 25 years, which is when I read it. You may have to read parts several (many!) times before you finally have it down. I carried it around for eight months, re-reading it at lunch, in airports, etc. until it was finally stolen in an airport departure lounge in West Palm. I wasn't that sorry to see the last of it. The guy who lent it to me never asked for it back, so I think he was glad to be rid of it too.

TheBigShort likes this.
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