ICT Mentorship Core Content - Month 10 - Bond Trading - Basics & Opening Range Concept
Introduction
The instructor introduces the lesson and reminds viewers that this is not trade advice.
Understanding Treasury Bonds
The instructor explains what a treasury bond is, the trading symbol for it, and the delivery contract months.
- Trading sessions for analyzing the New York session are discussed.
- The format used to enter charts or pull them up in data is explained.
- The amount per tick minimum fluctuation and full handle move are discussed.
Bond Opening Range Concept
The instructor discusses the opening range concept for bonds.
- True day for bond market is 8 A.M to 3 P.M New York time.
- Opening range between 8 A.M and 9 A.M tends to create the bond market high or low of the day.
- Liquidity pools are built around this location for stock market opening to be rated.
- Examples of opening ranges are shown with explanations of how they can be used to identify potential reversals.
Volume Divergence and Opening Range
In this section, the speaker discusses volume divergence and opening range in relation to commodities trading.
High Volume Divergence
- High volume divergence is an early sign that a rally is weak.
- The ideal scenario is for volume to have a higher bar on its highest high up moving in the 154.21.
- When trading commodities, we have a more accurate depiction of buying and selling pressure with real volume.
Bullish Order Block
- A bullish order block occurs when price makes a subsequent decline backed out into the opening range and then goes into consolidation.
- The largest volume was seen between 8 AM and 9 AM New York time, which led to a run into the 15426 level.
- However, there was no greater volume measuring later on in the day in the evening time.
Blending of Trading Techniques
- There is a blending of things that we've already learned about in Forex trading but now with specific commodities.
- When looking at the opening range for bonds, it's important to define it using bodies, wicks, previous highs, and lows just like with Asian range perspective in Forex trading.
Bond Market Trading
- The bond market is one of the least manipulated markets compared to others.
- It's important to avoid trading ahead of FOMC or interest rate-based reports as they can cause wonky movements in the bond market.
Introduction to Trading the Bond Market
The bond market is a highly liquid asset class that offers opportunities for trading. It can be swing traded, short-term traded, and day traded. This section provides an introduction to the bond market and its basic concepts.
Opportunities for Trading the Bond Market
- The bond market is highly liquid and offers opportunities for trading.
- When the bond market starts to move in one direction, it generally stays in that direction.
- Fair value gaps or Turtle soups using equilibrium ideas can be used to identify trading opportunities.
- Capturing 5 to 8 ticks as an intraday day trade is a good strategy.
Daily Range Expectations
- The bond market generally doesn't have a large daily range.
- A large range day is when you get a full handle or 32 ticks or one thousand dollars per contract.
- Sustained moves can create opportunities for capturing larger gains.
Liquidity Pools and Fair Value Gaps
- Liquidity pools, liquidity gaps, fair value gaps all occur in this asset class but not as frequently as in Forex markets.
- Order blocks may not always go up but instead go sideways or reverse.
Advantages of Trading Bonds
- The bond market allows for low expectations in terms of daily range while still offering respect of liquidity pools and fair value gaps.
- Swing trading, short-term trading, and day trading are all viable strategies depending on the conditions of the market.
How to Analyze the Bond Market
- Pull up barchart.com and look at a 15-minute time frame for one day pull up the zbu-17
- Keep a running Journal of what the bond Market's doing by changing the year respectively.
- Looking at the bond market on a day by day basis will increase your price action skills and develop a greater appreciation for this particular asset.
Conclusion
- The bond market is a good trading market that can be swing traded, short-term traded, and day traded.
- It offers opportunities for capturing small gains as well as larger gains during sustained moves.
- Studying the bond market can improve your price action skills and help you develop a greater appreciation for other assets such as commodities, interest rates, gold, foreign currencies etc.