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ICT Mentorship Core Content - Month 11 - Bond Mega-Trades
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ICT Mentorship Core Content - Month 11 - Bond Mega-Trades

Introduction

The mentorship is about Mega trades in the bond market and how to identify seasonal tendencies.

Identifying Seasonal Tendencies

  • The bond market has a repeating phenomenon that takes place every year.
  • There is generally some measure of weakness starting in the beginning of the year and trades down into some seasonal low that takes place between May and June every year.
  • May-June traditionally has a very high odds of making a low that is not a guarantee.
  • Anticipate weakness at the beginning of the year down into this May-June time period.

Focus on May-June Time Period

The primary setup to look for every year is the formation of a low in the bond market during May-June time period.

Trading Scenario

  • Focus primarily on May-June time period every single year for the formation of a low in the bond market.
  • You can anticipate weakness at the beginning of the year down into this May-June time period or simply wait until May and June of every year.

Interest Rate SMT

The interest rate smt is crucial to qualify and confirm that mega trade itself is actually unfolding.

Timing with Smart Money

  • Refer to five-year, ten-year notes comparably with 30-year bond market.
  • Application of relative strength analysis will aid in timing when smart money steps in and buys large magnitude bonds.

Mega Trade Setup

Simplified version for identifying mega trade setup.

Steps for Identifying Mega Trade Setup

  • Look for seasonal tendency forming late spring early summer which is May-June Bond Low.
  • Look for an SMT Divergence Across The Five-Year, Ten-Year, And 30-Year Bond Market.

Trading the Bond Market

In this section, the speaker discusses how to trade the bond market and what to look for in terms of price movements.

Anticipating a Move

  • The speaker suggests that traders should be looking for higher prices in the bond market on a higher time frame.
  • Traders should perform a daily scan for interest rate smt divergence between the five-year, ten-year, and thirty-year bonds.
  • Entry should be based on institutional order flow and entry techniques covered in other parts of this mentorship.
  • Traders should anticipate a move or duration that takes us into the fall months.

Timing

  • The speaker notes that traders should not overtrade bonds and wait for May-June period to begin trading.
  • Waiting for this period will help develop discipline and provide a clear objective approach to trading bonds.
  • This method is consistent with giving long-term swing traders model and position trader's model.

Benefits of Trading Bonds

  • Trading bonds provides opportunities for short-term day trading, scalping, swing trading, and position trading.
  • The speaker has a close love for trading bonds but prefers forex due to its potential profitability.

Analyzing Price Movements

  • Traders need to learn how to anticipate specific turning points by training their eyes on price movements.
  • There are two turning points on charts: one furthest left with a swing high, retracement, then another swing high forming; second is seen at lows forming across all three charts (five-year treasury note, 10-year treasury note, and 30-year treasury bond market).

Anticipating a Low

  • Traders should anticipate a low forming in the bond market between May and June.
  • This low will lead to a rally in the coming months after it was May-June lows form.

Smart Money Footprint in the Bond Market

In this section, we will learn about how the smart money footprint looks like in the bond market and how to use it to frame mega trades.

SMT Divergence

  • The five-year treasury note went lower, the 10-year diverged, and the 30-year was basically unchanged or equal low. This is SMT divergence.
  • The correlation between short-term yield (5-year), intermediate-term yield (10-year), and long-term yield (30-year) should be moving in tandem. When they don't move in tandem, it draws special attention to what may be a smart money accumulation pattern.

Seasonal Tendency

  • In June of 2008, there was a seasonal low forming for the five-year treasury note.
  • Trading down into that May-June time period for seasonal tendencies to kick in.

Mega Trade Opportunity

  • If we assume that we could have taken a long position at 112.5 when SMT divergence occurred, that would be $12,000 per contract of a move from June seasonal tendency just getting into September at contract expiration.
  • Let's say we took a long position at 114 during September-October time period going into November. That's an entry that's $28,000 per contract.

December Contract Analysis

In this section, we will analyze the delivery contract month of December 2008 and work our way out from 2008 to 2017.

SMT Divergence

  • The five-year treasury note had a slightly higher low while in consolidation, and the 10-year made a lower low compared to the five-year. The third year treasury bond was making a lower low. This is SMT divergence.

Seasonal Tendency

  • In September-October time period going into November, there was an impressive rally due to seasonal tendencies.

Mega Trade Opportunity

  • If we assume that we took a long position at 114 during September-October time period going into November, that's an entry that's $28,000 per contract.

Introduction

The speaker introduces the topic of trading bonds and discusses how to use seasonal tendencies to make profitable trades.

Using Seasonal Tendencies for Bond Trading

  • The speaker explains how to identify bullish order blocks and short-term cell stops on a weekly chart.
  • The speaker discusses a price rally in 2009 and how traders can use the 14 level as a potential entry point.
  • The speaker talks about rolling from September's contract into December's contract to take advantage of seasonal tendencies.
  • The speaker explains how traders can profit by buying bonds during the September rally and selling during October or November.

Intraday Analysis

The speaker provides an intraday analysis of bond trading, discussing divergences between different types of bonds.

Divergences Between Bonds

  • The speaker shows a chart with intraday data from May 12, 2010 to June 15, 2010, highlighting divergences between five-year treasury notes and ten-year treasury notes.
  • The speaker discusses institutional order flow and dynamic price movements in bond trading.

Mega Trade Entry Pattern

In this section, the speaker discusses the Mega Trade Entry Pattern and how it formed in 2010. They also look at the bond market on a daily timeframe.

September 2010 Delivery Contract

  • The entry point for the September 2010 delivery contract was at 122 and a half with Bond or interest rate s p Divergence.
  • The seasonal high was expected to occur in September or October time period.
  • The market eventually traded lower, making it a profitable trade setup.

December Contract of 2010

  • The price dips down and makes one more attempt to rally but doesn't really trade higher than the previous high.
  • The seasonal tendency made a trade unfold.

Five-Year Treasury Notes in 2011

  • Using relative strength differently, we can see that sometimes you have to trade through a short-term low to get the measurement.
  • By using three points of reference, we can make a swing low and anticipate smart money accumulation patterns.
  • We see that same dynamic five-year and ten-year agreement but not occurring in the third year.

Daily Timeframe for September 2011 Delivery Contract

  • The signal itself formed on July 8th, 2011 near the low end of this range.
  • For hindsight and hypothetical speaking, we got in at $124 per contract of price movement using the September delivery.

Short-Term Trading Characteristics

In this section, the speaker discusses short-term trading characteristics and how they relate to seasonal tendencies.

September-October Time Period

  • The September-October time period is when the market goes into a short-term Traders characteristic.
  • We're still looking for that seasonal high each year, and 2011 does it again.

Bond Market Analysis

In this section, the speaker analyzes the bond market from 2012 to 2015 and discusses seasonal tendencies and trading opportunities.

Seasonal Tendencies in Bond Market

  • In May-June 2012, there was a lower low in the five-year treasury note, but not in the ten-year or bond market. The market failed to move beyond this premium array.
  • In September-October 2012, there was an opportunity to rally and catch short-term swings, but there was no continuation of the May-June low into higher September-October time period.
  • In 2013, there was a lower low in both five-year treasury note and ten-year. There was no evidence of bullish seasonal tendency for a rally.
  • In contrast to December contract, September contract created buying opportunities but did not have a mega trade forming.
  • In 2014, there was a lower low in May-June time period. Bonds were on downtrend with zero mega trade forming for seasonal tendency for a rally.
  • In July 2014, bonds had stop run creating smt divergence between interest rates. This created another signal for bond market with big movement.

Trading Opportunities

  • Buying at $148 up to $149 gave about $5000 worth of price movement in May-June 2012. However, it failed to move beyond premium array leading to little payout.
  • Getting in at $135 in 2014 gave almost $7000 worth of price movement using September contract. December contract saw even further movement.

Conclusion

  • 2012 and 2013 were dud years with no bullish seasonal tendency for a rally.
  • In 2015, there was a higher low in May-June time period but lower low in ten-year creating smt divergence.

Mega Trades in the Bond Market

In this video, the speaker discusses mega trades in the bond market and how to identify them. The speaker looks at different years and contracts to show examples of mega trades.

2012: September Delivery Contract

  • Bearish order block leads to aggressive fall.
  • Mega trade with significant price movement.
  • No extrapolation on the upside for December contract.

2016: September Delivery Contract

  • SMD Divergence with higher low compared to bond market.
  • Entry at 163 with $14,000 payout.
  • No rally shown for September, October, November time period.

2017: September Delivery Contract

  • SMT Divergence present with willingness to not go lower during May-June time period.
  • Entry at 150 with $7,000 payout so far.
  • Seasonal tendency implies further prices but rest of year is uncertain.

Identifying Mega Trades

  • A mega trade is a move that results in a payout of $10,000 or more per contract.
  • Look for SMT Divergence and smart money buying aggressively as indicators of a potential mega trade.
  • Review earlier years using intraday charts to find patterns and footprints of smart money.
Playlists: 2017 ICT Private Mentorship Core Content Month 11
Video description

2017 Premium ICT Mentorship Core Content Video Lectures Audio and visuals are exactly as they were distributed in July 2017. CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN Trading performance displayed herein is hypothetical. Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. U.S. Government Required Disclaimer – Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with money you can’t afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. Trade at your own risk. The information provided here is of the nature of a general comment only and neither purports nor intends to be, specific trading advice. It has been prepared without regard to any particular person’s investment objectives, financial situation and particular needs. Information should not be considered as an offer or enticement to buy, sell or trade. You should seek appropriate advice from your broker, or licensed investment advisor, before taking any action. Past performance does not guarantee future results. Simulated performance results contain inherent limitations. Unlike actual performance records the results may under or over compensate for such factors such as lack of liquidity. No representation is being made that any account will or is likely to achieve profits or losses to those shown. The risk of loss in trading can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. If you purchase or sell Equities, Futures, Currencies or Options you may sustain a total loss of the initial margin funds and any additional funds that you deposit with your broker to establish or maintain your position. If the market moves against your position, you may be called upon by your broker to deposit a substantial amount of additional margin funds, on short notice in order to maintain your position. If you do not provide the required funds within the prescribed time, your position may be liquidated at a loss, and you may be liable for any resulting deficit in your account. Under certain market conditions, you may find it difficult or impossible to liquidate a position. This can occur, for example, when the market makes a “limit move.” The placement of contingent orders by you, 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.