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Trading: Dax, ES, FX, Gold and Oil but what Bund and Bobl also.
Posts: 105 since Jul 2012
Thanks Given: 108
Thanks Received: 126
When you're looking at the yield curve of a spread throughout the day, this changes in various ways. The idea behind mean reversion is that whatever happens the yield curve will come back to the norm. I have not much experience with ZN and ZB, currently focused on Bund, Bobl, Shatz spreads as well as Euribor and Eurodollar. It's easier to understand with Euribor or any other future with a lot of contracts, as you can take a lot of different contracts and plot the yield curve. if you tried throughout the day to follow 7 contracts or so all in the right order. You will notice that prices fluctuate over this curve. At times it flattens, other times it steepens. If the trader knows how the yield curve should generally look like (you could call this position 0), then he/she can take positions when specific contracts are out of place. Spreads all have their own characteristics, but generally they're more forgiving then outrights in my opinion. you just pay more to your broker for it. The more volatile the spread the easier it is to make more trades, the harder it is to be consistent i found. I prefer the boring stuff like Euribor all day. If I can make only 1 tick a day every day I'm happy. I'm in trading for the money not for the excitement, I can go vegas for that. I hope that helps a bit to clarify things.
I was in Propex and traded 2 years there.I can say that his trader friend gave 100% correct information.These 4 products are their main products.And 10yrs traded most.
The actual complete spread is more complex rather than simple spread.They call it structure.But normally they dun enter full structure cos of heavy comms.If 3y 10y side itself can make money and just took profit from it.
All I will say is depending on the instrument a calendar spread is not for mean reversion it’s directional - the structure mentioned above and there are other spreads which are inherently mean reverting but still can trend for a bit before reversing
Hi, I can tell you exactly how it was when I was a calendar spread trading on a trading floor. I was trading mostly euribor, short sterling and also dax, bund and s&p. We had a matrix created with 3months, 6 months, 9 months and a 1 year spread. Two 3 months spreads created a butterfly spread or a strategy and 2 butterfly spreads created a condor spread or a strategy. I was creating a trade even for days, when I was up 1 tick I was just adding to the trade more contracts ending with a position easy 150 -200 contracts, so my goal were even 2 ticks, but with such a position it made a difference. For dax or s&p I had just 1 DOm opened with a 3 month spread, then I was able to trade almost like an outright so I could easily make 30-40 ticks a day. It doesn't change a price as quickly as an outright, but it is possible to scalp, mostly dax and german bund. For me trading calendar spreads is ok, but not always it is for scalping, but mostly as an intraday trading where you slowly build a trade and close with 2 -3 ticks, but then you stop is also very tight even 1 tick. With euribor or ZN the bid and offer can be even 200 000 contracts, so waiting for a fill can take days or minimum few hours. On a 3 month spread there it is difficult to get filled, but on a 1 year spread it is very simple, but also a move on a 1 year spread is faster. So with that said, the longer calendar spread the more volatility there is, where as a 3 month spread makes 2 ticks a day for example. If you have more questions just ask
Appreciate for this information. Let's say I would like to focus on scalping/intraday the spreads market, which would you suggest for me? When you execute a trade, do you also use Technical Analysis on chart/Orderflow on DOM to define your entry?
You're welcome. For scalping intraday for me the best was dax, bund. The liquidity there was the best. I've traded a 3 month spread and I was checking an hourly and a daily chart, but mostly the tape as there is the best info you can get. Also sugar nr.11 was great for scalping and gasoil.
If I was trading calendar spreads today, then I would watch 1h chart, 15m chart and mostly DOM. Calendar spreads can be traded as a swing and also as a scalp. Depends on your style. For example I was trading euribor calendar spreads as a swing where i was holding trades even for 2 weeks until I've build a serious position with many contracts and I was trading for example FDAX and FGBL as a scalp, just like an outright.