3yr 10yr futures curve SFE

[nocandosville]

Does anyone here trade this? I've just started trying to learn with 3 lot of 3s and 1 lot of 10s. This obviously means I can't use the spread market to get out.

My overall strategy is to leg into the spread at a better price than the curve market. Looking at the market right now we have:

3yr:

97280/97290 with vol 1400 by 3500

10yr:

96720/96725 with vol 40 by 280

and the spread market is 555/560 with vol 21 by 8

- so we want to long @ 550 or short @ 565 to be in a +EV position
- If we were short @ 97290 in the 3 yrs then we could go long in the 10yrs @ the offer to have a good position.

The problem I have found so far is that I find it difficult to get good queue position in the 3yr bond without taking too big of a risk.

So if there are any curve traders here I have a few questions:
- how do you approach your trading? What do you look for in the market/other markets?
- Do you have orders waiting at key levels or do you just play what the market is giving you based on where you expect it to go?
- Do you aim to make 1/2 tick or scratch, or do you take a more long term angle?
- What % of your trades are scratches/losses/wins and how much?
- If you are trading the day session how often do you leg into the spread market?
- Any other tips you wish you had of known when you were starting?

Thanks very much

 

[white_goodman]

ive never traded that SFE bonds, but in terms of tradecraft (I trade the european stir spreads at home) always look to get filled/queue position on the market your transacting the most lots on, and lean on the other market (ie dont be a dick trying to get a good fill on the 10's aswell - hit market)..

I dont know if the SFE has it but the Euronext/CME etc have messaging rules ie transactions to order ratio (dont be putting up heaps of lots and cancelling them all).

generally id advise you to stick to spreads in all markets, and not just simple calendar or intercommods (crack,crush), you can get creative and make it fairly mind numbing to trade (but easy) if you want to delve deeper (crack boxes, double flys etc).. Dont get into the scalping the front month BS that all the noobs do, its a good way to burn through an account and too many amateur hours do it, theres some edge in back months where commercials give away edge to do business. If you feel it necessary to scalp ES or CL or anything make sure youve got an idea on lead-lag relationships to the market your trading.

 

[Trembling Hand]

Prop trainee?

 

[white_goodman]

Prop trainee?

all signs point to yes

 

[sommi]

Hi Friend

Two years future trader here for a Prop firm. I actively day trade the Aussie Curve and the size I use is trying to get on 64/20 up to 132/60 (so between 2 and 6 curve). I'm constantly working on improving this and I believe I can be doing 20 to 30 curve with-in a few years.

I can comment on your questions:

--> Your strategy is to leg the curve better than the interlink market. This used to be a decent strategy (2 years ago), however there are a lot of market makers in the Aussie markets now. Just to give you an example, I have heard of inside word that many hedge funds have now set up queue positioning other algorithms which operate in ALL of Australia Fixed income future products. They definitely try to hold queue positions in the Aussie Bonds and try to arb the curve. Its not free money. I often see them get pumped on dumb decisions they make. And rightfully so, I hate them with a passion because theyre heavy parasites and have tiny pain thresholds and they're generally pussys who can't take a real punt. Therefore, as a discretionary trader and with no permanent queue holding solution, legging outside curve prices takes OUTRIGHT TRADING risk.

If you like trading outright all the time, then by all means do it. But if you really want to trade a spread, I would not advise it unless you employ a strategy where you are only collecting between 10-20% of your size at each point, MAX. That means if you tried to get 1-curve on at each point, you are trying to leg between 3by1 up to probably 9by3 at each point (based on your variance of conviction)

Now I'll answer your questions specifically.

how do you approach your trading? What do you look for in the market/other markets?
- Well if you have been trading it for long then you would know it's a hard question to answer. What is my approach to trading the curve? I am day trading it between 1 to 3 days at a time (i've been in a curve position, stuck averaging, for up to a week and holding). You are looking for strength/weakness based on possible leads of the 3-year or 10-year leg. As a general guide, the 3-years like to follow what the S&P500 is doing (World Equities). The 10-years like to follow what the U.S. T-notes or the German Bund are doing.
-During the Asian market, you're almost gambling on ranges which almost needs to be done anyway.
-Just looking on its chart for range plays, or trends. Nothing special.
-The curve is an interest rate expectation tool, though. Sometimes, you will get overwhelmed by order flow based on expectations that the RBA will lean towards holding or cutting the interest rate.

Do you have orders waiting at key levels or do you just play what the market is giving you based on where you expect it to go?
-There's no point having orders in key levels in this market. Right now, the curve is directional. It can become really rangey for a while, so leaving orders is sometimes necessary. You have to constantly adapt. And, as a day trader, it doesn't even matter where I think the curve will go. It can squeeze you out anywhere. If it's dropped 3-4 ticks in a straight line, I look to just fade it for a tick. I don't employ fundamental directional strategies in it because I find its not worth my time and it basically requires someone watching your book 24/7 (that you need to pay). You're better off getting in and out when you think its appropriate.

Do you aim to make 1/2 tick or scratch, or do you take a more long term angle?
-Many people I know trade it differently. Brokerage is a big cost, so scratching generally sucks. But many people aren't big on the whole 'collecting' phase so scratching is very important to them. The problem is that the curve is generally a piece of sh*t sometimes and will not let you scratch anything anyways. We just deal with the pain.
-Profit target... depends on its volatility. 1-2 half ticks is what you need to aim for in general if you day trade it.

What % of your trades are scratches/losses/wins and how much?
-I don't calculate any of this. I am looking to trade between 6 to 8 different futures products. Hedging our bonds overseas, the curve, bank bill butterfly spreads, etc. etc.
-It's almost irrelevant. Sometimes I use the curve as a hedge if Im hedging a spread of the Aussie 10-yrs with the U.S. tnotes in the day session. Sometimes I use the curve just as a range play. Sometimes Im happy taking a loss on the curve every day for a week simply because Im making decent money in other products Im trading.

If you are trading the day session how often do you leg into the spread market?
-This is the most common question I get. Do you leg, or do you spread? Our bonds have terribly wide spreads in terms of world bond products. When you pay up in our bonds, you pay up BIG. Like paying a full 3-yr tick spread is HUGE. That's equivalent to 5 t-note ticks! That's equivalent to 10 Bund ticks!
-We just have to deal with the sh*tty illiquid and crappy nature of our Bonds. Thats why only the strong survive.
-I don't like to leg. 90% of the time, I am trading the SPREAD price thats it. I only leg very high probability fills most of the time. For example, if Im filled in the 10yrs and the 3yrs only have like 100 on its bid or offer, you're almost guaranteed to get filled there (hopefully... hopefully..)
-However, there are many people who literally leg and only leg. I find that these people have huge blowouts way more frequently than me. But, in other times, they 'exit' when Im still trapped. Still, I'd rather be stuck in it than taking on exponential legging risk.

Any other tips you wish you had of known when you were starting?
-Best tip? Trade the curve for 3-4 months if you're a futures day trader like me. Do it every single day and only the curve. Then, you will learn the lesson we all learn... that when the curve goes to sH*t, you aint making money for a while. So then its best to explore other products which aren't as crap

 

[Mr Rookie]

Hello Sommi, your point is awesome, by the way, how do your orders get filled if there are thousand people in the queue

Hi Friend

Two years future trader here for a Prop firm. I actively day trade the Aussie Curve and the size I use is trying to get on 64/20 up to 132/60 (so between 2 and 6 curve). I'm constantly working on improving this and I believe I can be doing 20 to 30 curve with-in a few years.

I can comment on your questions:

--> Your strategy is to leg the curve better than the interlink market. This used to be a decent strategy (2 years ago), however there are a lot of market makers in the Aussie markets now. Just to give you an example, I have heard of inside word that many hedge funds have now set up queue positioning other algorithms which operate in ALL of Australia Fixed income future products. They definitely try to hold queue positions in the Aussie Bonds and try to arb the curve. Its not free money. I often see them get pumped on dumb decisions they make. And rightfully so, I hate them with a passion because theyre heavy parasites and have tiny pain thresholds and they're generally pussys who can't take a real punt. Therefore, as a discretionary trader and with no permanent queue holding solution, legging outside curve prices takes OUTRIGHT TRADING risk.

If you like trading outright all the time, then by all means do it. But if you really want to trade a spread, I would not advise it unless you employ a strategy where you are only collecting between 10-20% of your size at each point, MAX. That means if you tried to get 1-curve on at each point, you are trying to leg between 3by1 up to probably 9by3 at each point (based on your variance of conviction)

Now I'll answer your questions specifically.

how do you approach your trading? What do you look for in the market/other markets?
- Well if you have been trading it for long then you would know it's a hard question to answer. What is my approach to trading the curve? I am day trading it between 1 to 3 days at a time (i've been in a curve position, stuck averaging, for up to a week and holding). You are looking for strength/weakness based on possible leads of the 3-year or 10-year leg. As a general guide, the 3-years like to follow what the S&P500 is doing (World Equities). The 10-years like to follow what the U.S. T-notes or the German Bund are doing.
-During the Asian market, you're almost gambling on ranges which almost needs to be done anyway.
-Just looking on its chart for range plays, or trends. Nothing special.
-The curve is an interest rate expectation tool, though. Sometimes, you will get overwhelmed by order flow based on expectations that the RBA will lean towards holding or cutting the interest rate.

Do you have orders waiting at key levels or do you just play what the market is giving you based on where you expect it to go?
-There's no point having orders in key levels in this market. Right now, the curve is directional. It can become really rangey for a while, so leaving orders is sometimes necessary. You have to constantly adapt. And, as a day trader, it doesn't even matter where I think the curve will go. It can squeeze you out anywhere. If it's dropped 3-4 ticks in a straight line, I look to just fade it for a tick. I don't employ fundamental directional strategies in it because I find its not worth my time and it basically requires someone watching your book 24/7 (that you need to pay). You're better off getting in and out when you think its appropriate.

Do you aim to make 1/2 tick or scratch, or do you take a more long term angle?
-Many people I know trade it differently. Brokerage is a big cost, so scratching generally sucks. But many people aren't big on the whole 'collecting' phase so scratching is very important to them. The problem is that the curve is generally a piece of sh*t sometimes and will not let you scratch anything anyways. We just deal with the pain.
-Profit target... depends on its volatility. 1-2 half ticks is what you need to aim for in general if you day trade it.

What % of your trades are scratches/losses/wins and how much?
-I don't calculate any of this. I am looking to trade between 6 to 8 different futures products. Hedging our bonds overseas, the curve, bank bill butterfly spreads, etc. etc.
-It's almost irrelevant. Sometimes I use the curve as a hedge if Im hedging a spread of the Aussie 10-yrs with the U.S. tnotes in the day session. Sometimes I use the curve just as a range play. Sometimes Im happy taking a loss on the curve every day for a week simply because Im making decent money in other products Im trading.

If you are trading the day session how often do you leg into the spread market?
-This is the most common question I get. Do you leg, or do you spread? Our bonds have terribly wide spreads in terms of world bond products. When you pay up in our bonds, you pay up BIG. Like paying a full 3-yr tick spread is HUGE. That's equivalent to 5 t-note ticks! That's equivalent to 10 Bund ticks!
-We just have to deal with the sh*tty illiquid and crappy nature of our Bonds. Thats why only the strong survive.
-I don't like to leg. 90% of the time, I am trading the SPREAD price thats it. I only leg very high probability fills most of the time. For example, if Im filled in the 10yrs and the 3yrs only have like 100 on its bid or offer, you're almost guaranteed to get filled there (hopefully... hopefully..)
-However, there are many people who literally leg and only leg. I find that these people have huge blowouts way more frequently than me. But, in other times, they 'exit' when Im still trapped. Still, I'd rather be stuck in it than taking on exponential legging risk.

Any other tips you wish you had of known when you were starting?
-Best tip? Trade the curve for 3-4 months if you're a futures day trader like me. Do it every single day and only the curve. Then, you will learn the lesson we all learn... that when the curve goes to sH*t, you aint making money for a while. So then its best to explore other products which aren't as crap

 

[Mr Rookie]

Hello Sommi, your point is awesome, by the way, how do your orders get filled if there are thousand people in the queue

Hi Friend

Two years future trader here for a Prop firm. I actively day trade the Aussie Curve and the size I use is trying to get on 64/20 up to 132/60 (so between 2 and 6 curve). I'm constantly working on improving this and I believe I can be doing 20 to 30 curve with-in a few years.

I can comment on your questions:

--> Your strategy is to leg the curve better than the interlink market. This used to be a decent strategy (2 years ago), however there are a lot of market makers in the Aussie markets now. Just to give you an example, I have heard of inside word that many hedge funds have now set up queue positioning other algorithms which operate in ALL of Australia Fixed income future products. They definitely try to hold queue positions in the Aussie Bonds and try to arb the curve. Its not free money. I often see them get pumped on dumb decisions they make. And rightfully so, I hate them with a passion because theyre heavy parasites and have tiny pain thresholds and they're generally pussys who can't take a real punt. Therefore, as a discretionary trader and with no permanent queue holding solution, legging outside curve prices takes OUTRIGHT TRADING risk.

If you like trading outright all the time, then by all means do it. But if you really want to trade a spread, I would not advise it unless you employ a strategy where you are only collecting between 10-20% of your size at each point, MAX. That means if you tried to get 1-curve on at each point, you are trying to leg between 3by1 up to probably 9by3 at each point (based on your variance of conviction)

Now I'll answer your questions specifically.

how do you approach your trading? What do you look for in the market/other markets?
- Well if you have been trading it for long then you would know it's a hard question to answer. What is my approach to trading the curve? I am day trading it between 1 to 3 days at a time (i've been in a curve position, stuck averaging, for up to a week and holding). You are looking for strength/weakness based on possible leads of the 3-year or 10-year leg. As a general guide, the 3-years like to follow what the S&P500 is doing (World Equities). The 10-years like to follow what the U.S. T-notes or the German Bund are doing.
-During the Asian market, you're almost gambling on ranges which almost needs to be done anyway.
-Just looking on its chart for range plays, or trends. Nothing special.
-The curve is an interest rate expectation tool, though. Sometimes, you will get overwhelmed by order flow based on expectations that the RBA will lean towards holding or cutting the interest rate.

Do you have orders waiting at key levels or do you just play what the market is giving you based on where you expect it to go?
-There's no point having orders in key levels in this market. Right now, the curve is directional. It can become really rangey for a while, so leaving orders is sometimes necessary. You have to constantly adapt. And, as a day trader, it doesn't even matter where I think the curve will go. It can squeeze you out anywhere. If it's dropped 3-4 ticks in a straight line, I look to just fade it for a tick. I don't employ fundamental directional strategies in it because I find its not worth my time and it basically requires someone watching your book 24/7 (that you need to pay). You're better off getting in and out when you think its appropriate.

Do you aim to make 1/2 tick or scratch, or do you take a more long term angle?
-Many people I know trade it differently. Brokerage is a big cost, so scratching generally sucks. But many people aren't big on the whole 'collecting' phase so scratching is very important to them. The problem is that the curve is generally a piece of sh*t sometimes and will not let you scratch anything anyways. We just deal with the pain.
-Profit target... depends on its volatility. 1-2 half ticks is what you need to aim for in general if you day trade it.

What % of your trades are scratches/losses/wins and how much?
-I don't calculate any of this. I am looking to trade between 6 to 8 different futures products. Hedging our bonds overseas, the curve, bank bill butterfly spreads, etc. etc.
-It's almost irrelevant. Sometimes I use the curve as a hedge if Im hedging a spread of the Aussie 10-yrs with the U.S. tnotes in the day session. Sometimes I use the curve just as a range play. Sometimes Im happy taking a loss on the curve every day for a week simply because Im making decent money in other products Im trading.

If you are trading the day session how often do you leg into the spread market?
-This is the most common question I get. Do you leg, or do you spread? Our bonds have terribly wide spreads in terms of world bond products. When you pay up in our bonds, you pay up BIG. Like paying a full 3-yr tick spread is HUGE. That's equivalent to 5 t-note ticks! That's equivalent to 10 Bund ticks!
-We just have to deal with the sh*tty illiquid and crappy nature of our Bonds. Thats why only the strong survive.
-I don't like to leg. 90% of the time, I am trading the SPREAD price thats it. I only leg very high probability fills most of the time. For example, if Im filled in the 10yrs and the 3yrs only have like 100 on its bid or offer, you're almost guaranteed to get filled there (hopefully... hopefully..)
-However, there are many people who literally leg and only leg. I find that these people have huge blowouts way more frequently than me. But, in other times, they 'exit' when Im still trapped. Still, I'd rather be stuck in it than taking on exponential legging risk.

Any other tips you wish you had of known when you were starting?
-Best tip? Trade the curve for 3-4 months if you're a futures day trader like me. Do it every single day and only the curve. Then, you will learn the lesson we all learn... that when the curve goes to sH*t, you aint making money for a while. So then its best to explore other products which aren't as crap