[grantx]

Buy 'em,

Thank you for the info re bonds. Also the excellent description re order-flow - I've got a lot to learn, here.

If the weekend commentaries are anything to go by, I reckon we'll see further rallies in fixed-income, sell-offs in equities. Let's see what happens in Asia overnight.

Good Trading,

Grant.

[buy 'em]

Your Welcome

I think we also will see more selling in the equities (At least I sure hope so as I'm short quite a few S&P contracts).

Although I don't think fixed income has much more room to rally. It just can't justify any lower yields. So I think we will continue to be range bound in the fixed income market while the equities sell off even more.

[grantx]

Buy 'em,

By Christ that was a quick reply - I wouldn't like to trade against you. Lower yields? Sure, but where else to put the money? At least it safe (as safe as anything can be today)and it won't go south for while (you can always hedge but I suspect this is also expensive).

I'll watch the S&P's and shout encouragement.

Grant.

[buy 'em]

lol yeah im quick but sometimes being too quick can cause you to make a lot of mistakes lol!

With the ****ty yields the fixed income markets are giving investors they are better off sticking it under their mattress or at least using a portion of it to pick bottoms in the stock market. The poor demand for debt at the auctions is also a sign that people have bought all the bonds they need (im talking US treasury markets).

Thanks, feel free to shout as loud as you want to lol! My profit target on the S&Ps is 1300 and I think we could be even lower than that by the end of this week but im always a bear!

[mckaldey]

Originally Posted by buy 'em

The next area is to find out where is the paper giving up most of its edge?

In other words which is being hit more the bid or the offer and how aggressive are those market orders?

This is telling us people are not willing to wait around and hope to get filled on the bid/offer and instead are just taking the bid/offer.

The nice thing about actually looking at the transactions that are taking place on the bid/offer is that they cannot be manipulated like the bid/offer. Its easy to place a 2000 lot order on the bid and pull it right away but you cant just buy 2000 contracts and then cancel it!

Looking at the bid/offer transactions can also give you a good idea of the tempo of the market. Is it fast paced or slow paced? Are the offer transactions aggressive and the bid transactions less aggressive or the opposite?

Great stuff buy 'em. Thanks for this lesson.

A lot to think about, hopefully I interpret it te right way.
In general I tend to overcomplicate things.

If you talk about bid/offer transactions you refer to the tape?
Is it always the combination of tape and DOM you watch when you judge what happens in the market?

How do you recognize market orders? Orders on the tape below the bid or above the ask?

One thing I think I understood: If a big order stops the market, it will most likely turn and if it eats up the order, it breaks through...

Really a lot to think about and to watch in realtime.

[grantx]

Mckaldey,

I think that's the crucial point re buy 'ems post - we have to study the DOM (and Time and Sales) until we can recognise and interpret subtle shifts in sentiment or behaviour. The saying goes, "You have to put the screen-time in", ie watch and study hard for a long time. No short cuts in this business.

Grant.

[buy 'em]

Originally Posted by mckaldey

Great stuff buy 'em. Thanks for this lesson.

A lot to think about, hopefully I interpret it te right way.
In general I tend to overcomplicate things.

If you talk about bid/offer transactions you refer to the tape?
Is it always the combination of tape and DOM you watch when you judge what happens in the market?

How do you recognize market orders? Orders on the tape below the bid or above the ask?

One thing I think I understood: If a big order stops the market, it will most likely turn and if it eats up the order, it breaks through...

Really a lot to think about and to watch in realtime.

No problem, yeah overcomplicating things in this business can be fatal!!!

Bid/Offer transactions are just market orders. So say the market is 40 bid @ 40.25. So a market order is somebody just buying contracts at 40.25 or selling contracts at 40 So essentially they aren't waiting around and joining the bid/offer. They are just taking the best bid/offer out there at the moment.

The tape and DOM are the same thing. There is also time and sales but I don't use that.

Yeah thats exactly right. Locating the big bids/offers first is the foundation to everything else. You always want to be trading with the big boys and not against them.

I will try to make things a little more clear in my next post.

[buy 'em]

Ok guys i'm going to try to simulate a typical trade of mine during the day.

First I usually have the orderbooks up for bund, bobl and schatz up along with a 15 min chart of the schatz.

Next I'm looking for big bids/offers on the schatz book. The bids/offers that usually are the most honest are the ones that are farther out in the book (not the first 2 best bids and offers usually but not always). Also if there is a bid/offer at roughly the same level on one of the other contracts (bund or bobl) that is usually a good indication of an honest bid/offer. So say there is a nice size offer of 2000 contracts at the 8th best offer on the orderbook. Immediently I check out my 15 min chart and look to see if that is some sort of resistance level, if it is great if its not I still will lean on that size. I also check out the bund and bobl orderbooks and see if they have big size on the offer at roughly the same level in the orderbook.

Now I watch the market extremely close. If we are trading closer to that size is the offer getting bigger or is it getting weaker? If it is getting stronger I will sit tight and maybe add positions, if it gets substantially weaker then I remove my offer.

So say my order is still in place and I get filled. I will exit the market if we can break through that big order I leaned on so my risk is very little while at the same time im aiming for about 3-4 ticks so its a very good risk/reward setup.

A whole lot more goes into my decision making than that but at its most basic form that is what I am doing. Read over and over those posts I made about orderflow and watch the market continously while having no opinion what so ever. Just trade what you see not what you think.

Good Trading Guys