90 Days Trading Bonds

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Magnus Phillips
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3 Training Framework Basics, Risk & Responsibility Pricing Scales, References Trade Entry Factors ORT Opening Range Trade Daily Spread Values Additional Factors Day Type Outer Spread Values Daily Pivot Zone Gap Zones 30-Year Reversals OFA & Trade Management Monitoring the Print Reading the Inside Market Trailing Stops Daily Workflow Steps Trading Orientation (3 Days) Bonus ES Trade All OFA Settings 2015, All Rights Reserved. Order Flow Analytics, Inc. 3

4 Bond Trading Basics Contracts for future delivery Months: March, June, September & December Face value of $100,000 per contract Minimum Margin (day) per contract: $500 Exchange Margin: $3400 (30), $1350 (10), $900 (5) HIGHLY LEVERAGED 2015, All Rights Reserved. Order Flow Analytics, Inc. 4

5 Important Risk Disclosure: Order Flow Analytics, Inc. ( OFA ) does not hold itself out as a Commodity Trading Advisor ( CTA ). Given this representation, all information and material provided by OFA is for educational purposes only and should not be considered specific investment advice. This brief statement does not disclose all of the risks and other significant aspects of trading in futures and options. In light of the risks, you should undertake such transactions only if you understand the nature of the contracts (and contractual relationships) into which you are entering and the extent of your exposure to risk. Trading in futures and options is not suitable for many members of the public. The risk of loss in trading commodity futures contracts can be substantial. You should, therefore, carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. CME GROUP BROKER CFTC NFA 2015, All Rights Reserved. Order Flow Analytics, Inc. 5

6 Margin Basics 30 Year Bonds $31.25 per tick (16 ticks = $500) 4 tick Stop-Loss = $125 25% of Day Margin at Risk 10 Year Notes 5 Year Notes $ per tick (32 ticks = $500) $ per tick (64 ticks = $500) 5 tick Stop-Loss = $ % of Day Margin at Risk 6 tick Stop-Loss = $ % of Day Margin at Risk 2015, All Rights Reserved. Order Flow Analytics, Inc. 6

7 Capital at Risk - Avoid Trading Scared 4% 25 Consecutive Losses 30 Year: $125 / 0.04 = $ Year: $ / 0.04 = $ Year: $ / 0.04 = $1172 2% 50 Consecutive Losses 30 Year: $125 / 0.02 = $ Year: $ / 0.02 = $ Year: $ / 0.02 = $2344 1% 100 Consecutive Losses 30 Year: $125 / 0.01 = $12, Year: $ / 0.01 = $ Year: $ / 0.01 = $ % 200 Consecutive Losses 30 Year: $125 / = $25, Year: $ / = $15,625 5 Year: $ / = $ , All Rights Reserved. Order Flow Analytics, Inc. 7

8 Personal Responsibility YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A STOP-LOSS OR STOP-LIMIT ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. Chip is not your trading advisor. You must take responsibility for your own actions and finances. 2015, All Rights Reserved. Order Flow Analytics, Inc. 8

9 Bond Pricing Scales 30-Year Priced in 1/32 nd of 1 point 32 ticks per point n 00 to n Year: ½ of 1/32 nd of 1 point 64 ticks per point n 000 to n Year: ¼ of 1/32 nd of 1 point 128 ticks per point n 000 to n , , , , , , , , , , , , , , , All Rights Reserved. Order Flow Analytics, Inc. 9

Pricing Scale Reference Pit Open Price: 165 30 Upper Spread

Scale Reference Tables My OFA (http://orderflow.

15 Trade Entry Basics Know where the generic stop is before placing a trade 30-Year = 4 ticks 10-Year = 5 ticks 5-Year = 6 ticks Locate target before executing Target 1 => Stop Value Validate Risk to Reward of secondary targets Must see size at entry price to trigger trade Long (buy) requires 100+ contracts at ASK Short (sell) requires 100+ contracts at BID (Later Section) (Print Section) 2015, All Rights Reserved. Order Flow Analytics, Inc. 15

16 Factor 1 - Opening Range Trade (ORT) 30-Year Bonds are North Star Range is High and Low of Premarket Hour (6:20 to 7:20am CT) If 30-Year ORT Qualifies, Then Momentum Strategy for Day If 30-Year ORT <= 16 Ticks, Then TRUE FOR ALL 3 Breakout Trade 1 tick above range Breakdown Trade 1 tick below range Locate Stop: 4 ticks (30), 5 ticks (10), 6 ticks (5) Identify Target 1 Identify Target 2 Qualify Risk to Reward Wait for Trigger: 100+ at bid (sell) or ask (buy) Right Now Next Steps 2015, All Rights Reserved. Order Flow Analytics, Inc. 16

17 ORT CHART EXAMPLES NOT TRADE EXAMPLES DON T CONFUSE Objectives: 1. Find 30-Year Range 2. Calculate & Qualify ORT Value 3. State the Strategy for Day 4. Find 10 & 5-Year Ranges 5. Determine Breakout Entry, Stop Target , All Rights Reserved. Order Flow Analytics, Inc. 17

19 Factor 2 Daily Spread Values Begin with the Pit-Open Price (7:20am CT Open*) Add & Subtract the Spread Value (Scale Reference) 30-Year: Add 13 ticks, Subtract 13 ticks 10-Year: Add 11 ticks, Subtract 11 ticks 5-Year: Add 11 ticks, Subtract 11 ticks Daily Spread & Open are Primary Support/Resistance for Day Spread Prices Become Potential ORT Target 2 90% of Days: Directional Price Action to Spread within First Hour Moves to/from Spread Values without pulling back 4, 5, 6 ticks *7:21 bar on Ninja Inside Day 10% of Days 2015, All Rights Reserved. Order Flow Analytics, Inc. 19

20 DAILY SPREAD VALUES CHART EXAMPLES NOT TRADE EXAMPLES DON T CONFUSE Objectives: 1. Identify Pit-Open Price 2. Calculate Daily Spread Values (Price Scale) 3. Visualize Directional Moves v. Inside Day 4. Combine Spreads with ORT Strategy 5. Quickly Determine Potential R:R 2015, All Rights Reserved. Order Flow Analytics, Inc. 20

22 Factor 3.1 Day Types: Inside, T&R, Trend Outer Spread Outer Spread INSIDE DAY TREND DAY Upper Spread Pit Open 10% 80% 10% Lower Spread First Hour of Trade TEST & RETEST DAY Outer Spread Outer Spread 2015, All Rights Reserved. Order Flow Analytics, Inc. 22

23 Factor 3.2 Outer Spread Values Begin with the Pit-Open Price (7:20am CT Open*) Add & Subtract the Outer Spread Value (Scale Reference) 30-Year: Add 25 ticks, Subtract 25 ticks 10-Year: Add 23 ticks, Subtract 23 ticks 5-Year: Add 22 ticks, Subtract 22 ticks Excellent 3 rd Targets (5 Year R:R) Provide Upper Resistance / Lower Support From Upper Daily Spread to Outer Spread Value From Lower Daily Spread to Outer Spread Value *7:21 bar on Ninja 1 st Hour Price Action Above / Below Outer Spread Indicates Trend Day *10% of Days 2015, All Rights Reserved. Order Flow Analytics, Inc. 23

24 OUTER SPREAD VALUES CHART EXAMPLES NOT TRADE EXAMPLES DON T CONFUSE Objectives: 1. Calculate Outer Spread Values (Price Scale) 2. Visualize Inside, Test Retest & Trend Days 3. Combine Spreads with ORT Strategy 4. Quickly Determine Potential R:R 2015, All Rights Reserved. Order Flow Analytics, Inc. 24

26 Factor 3.3 Daily Pivot Zone 60-Second Pit Close Range (Previous Day) 13:59 to 14:00 CT High to Low Automated with OFA/ORT Pivot Zone Determines Sentiment Trading Above: Bullish Trading Below: Bearish Can Isolate Single-Price with VCA Final Minute of Pit Trading BULLISH BEARISH 2015, All Rights Reserved. Order Flow Analytics, Inc. 26

27 PIVOT ZONE CHART EXAMPLES NOT TRADE EXAMPLES DON T CONFUSE Objectives: 1. Identify Pit-Close Range 2. Visualize Bullish Bearish Sentiment 3. Use OFA, VCA, ORT to Isolate Single Price 2015, All Rights Reserved. Order Flow Analytics, Inc. 27

29 Factor 3.4 Gap Zones Major Support / Resistance Levels Generated from 720, 60 & 5 Minute Candle Charts Identify Large Candles: Larger than previous 3 candles Larger than next 1 candle Qualify the Gap No overlap of previous/next high/low Draw the Gap Zone Low of previous high of next (Gap Down) High of Previous low of next (Gap Up) GAP ZONE Large Candle 2015, All Rights Reserved. Order Flow Analytics, Inc. 29

31 GAP ZONE CHART EXAMPLES NOT TRADE EXAMPLES DON T CONFUSE Objectives: 1. Locate Large Candles 2. Qualify & Draw Gap Zone 3. Find Support / Resistance Price 4. Compare Related Charts 2015, All Rights Reserved. Order Flow Analytics, Inc. 31

33 Factor Year Reversals 30-Year Directional Price Action 8 Ticks 12 Ticks 16 Ticks Combine 30-Year Levels with 30-Year Reversals (30-Year Trades) What s the Recent High/Low of Directional Movement? How far to Open, Daily Spread, Outer Spread, Pivot Zone, Gap Zone? Never use a swing through open as a reversal measurement! Combine 5/10-Year Levels with 30-Year Reversals (5/10-Year Trades) Swing on 30 ending while 5/10 holding Open/Spread/Pivot/Gap Exclude 30-Year swings through open! 2015, All Rights Reserved. Order Flow Analytics, Inc. 33

34 30-YEAR REVERSAL CHART EXAMPLES NOT TRADE EXAMPLES DON T CONFUSE Objectives: 1. Identify Reversal Swings 2. Eliminate swings through open 3. Align 30-Year Levels & Reversals 4. Align 5/10 Year Levels & 30-Year Reversals 2015, All Rights Reserved. Order Flow Analytics, Inc. 34

36 Order Flow & Trade Management Order Flow Primer Trades v. Orders Classifying Volume Profiling Volume / Points of Control (VPOC) Monitoring the Print Triggers and Concerns Reading the Inside Market Best Bid / Best Offer (BBO) Trailing Stops with Volume Clusters 2015, All Rights Reserved. Order Flow Analytics, Inc. 36

Orders to Buy Bidding for Price Best Bid 139 Wanted @ 164 27 NO

37 More Than Prices: An Auction Process Offers Orders to Sell Asking for Price Best Offer 190 For Last Trade Price Bids Orders to Buy Bidding for Price Best Bid NO TRADE WITHOUT COMPROMISE 2015, All Rights Reserved. Order Flow Analytics, Inc. 37

38 How Orders Become Trades Seller Agrees to Lower Price (Sells into Best Bid) ASK Aggressive Buyer / Passive Seller Buyer Agrees to Higher Price (Buys into Best Offer) BID Aggressive Seller / Passive Buyer Objective: Buy with Aggressive Buyers Sell with Aggressive Sellers 2015, All Rights Reserved. Order Flow Analytics, Inc. 38

Classifying Volume VOL AT BID VOL AT ASK Strong Ask Strong Bid

VPOC Volume Cluster 2-4 Prices Highest Concentration VCA Volume

Trade Management Monitor the Print Entry Process 100+ Ask (Buy) / Bid (Sell) When to Be Concerned Watch the opposite side Bid for Long Positions Ask for Short Positions 3 Consecutive Prices

43 Trade Management Monitor the Print Entry Process 100+ Ask (Buy) / Bid (Sell) When to Be Concerned Watch the opposite side Bid for Long Positions Ask for Short Positions 3 Consecutive Prices Back Weakness No sequential strength Only Size In Move Once the directional move in bonds starts, there should be no opposing size. 2015, All Rights Reserved. Order Flow Analytics, Inc. 43

44 6 Ticks Profit Assume Short with 125 Start monitoring last 3 ASK Print Management Entering with Size Expect Size Near Entry! From Low Concern Within 6 ticks of Profit Expect a directional domination Begin monitoring opposition Last 3 BID/ASK Less than 100 = Excellent Less than 500 = Important Concern is not an exit! Proximity to level? Sequence? Strength? VCA? 2015, All Rights Reserved. Order Flow Analytics, Inc. 44

On Chip s Screen Assume Short with 125 Size-Up Strong Print Text Mentally Dim the lights Focus on opposition Weakness Wins Trades Weak sequence (2+)

45 On Chip s Screen Assume Short with 125 Size-Up Strong Print Text Mentally Dim the lights Focus on opposition Weakness Wins Trades Weak sequence (2+) is great Be concerned with strong sequences 500+ without strength is OK 6 Concern? Weakness 2015, All Rights Reserved. Order Flow Analytics, Inc. 45

Reading the Inside Market Where is the Best Bid and Best Offer (BBO)? Long Lifting the Best Offer Short Dropping the Best Bid How long has it been pushing?

46 Reading the Inside Market Where is the Best Bid and Best Offer (BBO)? Long Lifting the Best Offer Short Dropping the Best Bid How long has it been pushing? Remember Bonds move SLOW Watching the BBO actually provides feedback! ~10 Seconds Against in a Directional Move 2015, All Rights Reserved. Order Flow Analytics, Inc. 46

Inside Market: BBO the Order Pulse 164 30 Best Offer

SPREAD 164 28 Best Bid 164 29 Last Trade Spread

51 Daily Workflow Start Prepared (NOT AT 7:20am CT) Pre-Market Homework Pivot Zone Gap Zones Key 30-Year Swing Points for Reversals 7:20am CT Pit-Open ORT Open Price Daily Spread Outer Spread Key Relationship Declare Strategy for Day ORT > Breakout (Simple) Fades/Pullbacks (Added Complexity) Analyze Basic Risk:Reward Plan your trade / Trade your plan Focus for 2 Hours No / text / phone Participate in Room Practice for 2 Hours Replay, Replay, Replay! 2015, All Rights Reserved. Order Flow Analytics, Inc. 51

presented by Thomas Wood MicroQuant SM Divergence Trading Workshop Day One Naked Trading Part 2

presented by Thomas Wood MicroQuant SM Divergence Trading Workshop Day One Naked Trading Part 2 Risk Disclaimer Trading or investing carries a high level of risk, and is not suitable for all persons. Before