Interestrates
Rates not acting as if a cut is coming...Let's look at rates for a bit.
Short term #yield is slowly climbing the trend line.
1 & 2 Year.
Longer term #interestrates look similar to the short term.
10 & 30 Year.
US #Dollar not as strong as bond yields but it is trading similar to them.
TVC:TNX TVC:DXY
How does inflation affect the stock market?The world’s financial environment has become incredibly tangled and multifaceted. The global availability of information to investors, particularly in rural areas, thanks to the internet, has caused investor sentiment to shift from an emotional response to an analysis and data-driven one.
Inflation serves as a prime example of this. In the past, most individuals viewed inflation as an indication of an unhealthy economy.
However, in the present day, investors have become more knowledgeable about economic cycles and are capable of making sound investment decisions at each stage of a country’s economy.
Therefore, today, we will discuss inflation in general and evaluate its influence on the stock markets in India. Let’s start with a topic on How does inflation affect the stock market.
What is Inflation?
In simple words, inflation refers to the gradual increase in the prices of goods and services. As the inflation rate rises, so does the cost of living, resulting in a decrease in purchasing power.
As an example, suppose bananas were priced at Rs.100 per kilo in 2010. In an inflationary economy, the cost of bananas would have increased by 2020.
Let’s assume that the price of a Banana is now Rs.200 per kilo in 2020. Thus, in 2010, with Rs.1000, you could buy 10kg of Banana.
However, in 2020, due to the decrease in purchasing power caused by inflation, you would only be able to buy 5kg of Bananas for the same amount.
To understand inflation in detail, let’s have a look at what is the reason behind inflation. So, there are two major factors behind an increase in the rate of inflation in the economy.
1) Demand > Supply
One reason for an increase in the inflation rate is when the average income of individuals in an economy rises, and they want to purchase more goods and services.
During such times, the demand for these products and services can exceed their supply, resulting in a scarcity of these goods and services. Consequently, buyers are willing to pay more for them, which leads to a general increase in prices.
2) Increase in the cost of production
Another reason for an increase in the inflation rate is when the cost of production of goods and services increases due to an increase in the costs of raw materials, labour, taxes, etc.
While this leads to an increase in the cost of production, it also causes a decrease in the supply of these goods and services. With the demand remaining constant, the prices tend to increase.
Inflation and the Indian Stock Markets:
The price of a share in the stock markets is determined by the interplay of demand and supply, which is influenced by a variety of factors, including social, political, economic, cultural, and so on.
Anything that affects investors can have an impact on the demand and supply of stocks, and inflation is no exception. Here is a brief overview of the impact of inflation on stock markets:
1. The Purchasing Power of Investors
Inflation, by definition, is a rise in the prices of goods and services, and it is also an indicator of the diminishing value of money.
Therefore, if the inflation rate is 5%, then Rs.10, 000 today will be worth Rs.9, 500 after one year. If the inflation rate increases to 10%, then the same amount will be worth even less in the future.
So, as the inflation rate increases, the purchasing power of investors decreases. This decrease in purchasing power can directly impact the stock market since investors would be able to purchase fewer stocks for the same amount.
2. Interest Rates
When the inflation rate rises, the Reserve Bank of India ( RBI ) often increases interest rates for deposits and loans. This move is intended to encourage people to save money and limit excess liquidity, thereby reducing the inflation rate.
However, as loans become more expensive, the cost of capital for companies also increases. Consequently, the projected cash flows of companies are valued lower, which can lead to lower equity valuations.
3. Impact on Stocks
As the increase in the inflation rate, speculation about the future prices of goods and services can create a highly volatile market environment. Since prices are rising, many investors may speculate that companies will experience a drop in profitability. As a result, some investors might decide to sell their shares, leading to a drop in their market price.
However, other investors who remain optimistic about the company’s future profitability may continue to buy these stocks, which can create a volatile environment in the stock market.
Value stocks tend to perform well during times of inflation because they are often more established companies with stable earnings and a history of paying dividends, making them more attractive to investors seeking steady returns. In contrast, growth stocks are often newer companies with higher potential for future earnings, but they may not have established cash flows to support their valuations.
When inflation rises, investors may become more risk-averse and prioritize stable, predictable returns over potential growth, leading to a decline in demand for growth stocks and a corresponding drop in their market prices.
4. Long-term benefits of increasing inflation rates on stock markets
A certain level of inflation is required for an economy to grow, as it encourages spending and investment. A moderate and controlled rise in inflation rates can lead to an increase in the income of the people and help in boosting the economy.
However, if the inflation rate goes beyond a certain limit, it can have a negative impact on the economy. Therefore, it is crucial to maintain a balance between inflation and economic growth.
Conclusion:
Investors should analyse the trend of inflation rates in recent years before making any investment decisions. Sudden spikes in inflation rates may cause uncertainty and volatility in the stock markets, while a gradual and steady rise in inflation rates can provide a conducive environment for businesses to grow and expand, leading to higher stock valuations. Additionally, investors should consider investing in sectors that perform well in an inflationary environment, such as energy, commodities, and real estate.
___________________________
💻📞☎️ always do your research.
💌📫📃 If you have any questions, you can write me in the comments below, and I will answer them.
📊📌❤️And please don't forget to support this idea with your likes and comment
$GBIRYY -CPI (YoY)The inflation rate in the United Kingdom remained stable at 6.7% in September 2023,
holding at August's 18-month low and defying market expectations of a slight decrease to 6.6%.
Softer price increases in food and non-alcoholic beverages (12.1% vs 13.6% in August) and furniture and household goods (3.7% vs 5.1%) were offset by a smaller decline in energy costs (-0.2% vs -3.2%) on the back of a monthly rise in motor fuel costs.
Moreover, the core inflation rate,
which excludes volatile items such as energy and food,
dropped to 6.1%, reaching its lowest point since January but slightly exceeding forecasts of 6%.
Both of these figures have remained significantly above the Bank of England's 2% target,
further emphasizing the mounting inflationary pressures in the country and complicating further the task for policymakers who are expected to keep interest rates unchanged at the upcoming meeting.
On a monthly basis, the CPI rose by 0.5% in September, the most substantial increase since May.
source: Office for National Statistics
BoJ Hikes Rates, the first time in 17 years!Yesterday, the Bank of Japan (BoJ) released its decision to end eight years of negative interest rates, adjusting the short-term policy rate to around 0.00% to 0.10%.
Although an interest rate hike is supposed to lead to the currency strengthening, the Yen weakened following the release of the news, with the USDJPY climbing higher from 149.40 toward the resistance level of 151.
The BoJ also indicated that while it will scrap its YCC framework (upper bound of 1% on 10-year JGBs) it will continue to buy some Japanese Government Bonds (JGBs), maintaining a Quantitative Easing (QE) approach, hence keeping some aspect of the accommodative policy.
Markets anticipate that this could be a one off adjustment, and the BoJ is unlikely to follow yesterday's rate decision with a series of rate hikes. This could be considered as a Dovish rate hike.
The divergence in monetary policies between the BoJ and the FOMC (and other major central banks) continues, which is likely the cause of the continued weakness of the Yen.
Today, the Yen has continued to weaken, with the USDJPY breaking above the round number resistance of 151, and is likely to retest the historic high of 151.90, last reached in November 2023.
Attention now shifts toward the FOMC.
Market Surprise? June Rate Cut Might Be Delayed Market Surprise? June Rate Cut Might Be Delayed
After today’s BOJ and RBA interest rate decisions, eyes will turn to the Fed’s decision on Wednesday.
Although the US central bank is expected to keep rates unchanged, it could change its outlook due to the upside surprise in the latest CPI and PPI reports.
For now, the first cut is still seen happening in June, but there is a possibility that this gets pushed back a month or two again. Maybe the market would be the only one surprised by this possibility.
But what USD pair could be interesting this week?
The Canadian Dollar is facing pressure in anticipation of the February inflation figures set to release on Tuesday. Analysts expect the annual headline inflation to have risen to 3.1% from January's 2.9%. This could postpone the Bank of Canada's intentions to lower interest rates, potentially leading to a clash with the Federal Reserve's monetary policy plans.
Depending on where market sentiment lay after we get the US and Canada data, the 100-day SMA could continue to support bulls. If sentiment turns, we have the 50- and 200-day SMA, which sits just above the ascending triangle trend, as a target for another support.
USDJPY I BOJ will possibly end negative interest ratesWelcome back! Let me know your thoughts in the comments!
** USDJPY Analysis - Listen to video!
We recommend that you keep this pair on your watchlist and enter when the entry criteria of your strategy is met.
Please support this idea with a LIKE and COMMENT if you find it useful and Click "Follow" on our profile if you'd like these trade ideas delivered straight to your email in the future.
Thanks for your continued support!
URGENT , GOLD WILL DROP TO 2115Today's EUR interest rate decision, where the European Central Bank is expected to maintain the current rate, could lead to a stronger euro and a weaker dollar. This might decrease the demand for gold, causing XAUUSD to potentially drop to 2115. Keep an eye on the announcement for trading decisions.
Long-duration bonds are cheap. EDV & TLTInflation has come down down, FED is planning to begin cutting rates this year. Interest rates are the highest in the US of any developed country. Long term bonds especially are a good investment here. EDV and TLT both track them and are currently paying a good yield too. I expect these to double from current prices over the decade. The next time things break and the FED is forced to cut rates more aggressively, these will be up huge
Counter argument to no rate cuts, Oil looking goodWe've been expecting #InterestRates to be cut.
Here's the counter argument to that...
Economy not slowing down. Bigs are getting bigger.
Labor market is tight. People are working 2 to 3 jobs.
Expected payroll raises in the near future.
Expected increase in prices by businesses.
Rent and housing prices are still rising, for the most part.
Oil is trending higher. The Middle East conflict adds to this.
Getting Paid? With the USD/TRY Carry Trade?The USD/TRY has one of the highest Roll Over Interest out there should you choose to take on this highly volatile pair. It isn't so much that it is volatile, it has to do more with price just moves one direction, and that is up. The way we want to go is down (short) or at least sideways (ranging). Why is this interesting? It is because the Rollover Interest for going short stands at a whopping annualized rate of 28.94%. With 1:4 Margin Requirement for trading a standard lot on the TRY (based off the broker I use), $25,000 could earn me $28,940 yearly, which would be a staggering 115% return at the end of the year. Compounded, I would be a multimillionaire in no time, Buying up yachts, private jets, gourmet food, luxury cars, a pony that shoots lasers, Space X Starship, and countless other items.
But hold up, is there a downside or something that makes this too good to be true? Yes, there is price movement as well as changes in interest rates as well as capital in the account. Having only $25,000 in the account, going full throttle and placing one huge position is sure to activate a margin call within seconds (as price can move thousands of pips against you quickly) and/or cause you to lose more than you put in. Now, we don't want that. You would need to have at least double the amount in the account in order to allow for price movement. The return would be halved, but making over 50% yearly isn't too bad either, is it? With price movement, the USD/TRY (I just call it the TRY), price moved higher over 57,000 pips in 2022, and over 100,000 pips in 2023; that is $18,240 and $32,000 respectively. Interest have just reached 45%, so things definitely would not have been good. Now, with funds in your account, not to many of us have $25,000 lying around to utilize in the markets, nor do we want to just tie up $25,000 into something really risky.
Yet if used correctly and price does stabilize, then the TRY carry trade could payout (similar to the EUR/HUF). What could be done to reduce the risk? For starters, position sizing. Don't use the full force of your account and go "YOLO." Manage expectations. With a $25,000 account size, only getting into a position at around $3,750 (which is about 15% of the account used and a 15k position), would be around $3,650 return, which would be about a 14.6% return (still not bad. How many people can do this). If things go sour and price does move up at the end the year by 100,000 pips against you ($0.05 move per pip), that would be -$5,000 reduced to $1,350 because of the gained rollover interest (which would be only a 5% hit to your account instead of 20%). Putting some hedges in could also reduce some of the risk. Additionally, research and analysis, this could push you to make a more informative speculation on if getting into the pair is a good idea. Furthermore, to really ensure you don't lose any money, is to not get into the pair at all.
For myself, I am utilizing around 41% of my Forex account in this pair, about 14% of my overall accounts. There are hedges in place to reduce the impact of price moving against me as well as my position being small enough to not cause any traumatic moves, even if price moves 100,000 pips against me (of course don't want that to happen). The decision is also made to stay in this pair for the long term or until there is some major changes. There is additional funds in reserves if needed, if things don't go well, in order to put another plan into play to get out of my positions in an orderly fashion.
You all have some great trading out there.
Looking at short & long term yieldsGood Morning Update
Looking at the short & long term Bond Yields.
Short term (3M & 6M) yields are trading above bank crisis levels.
The 1Yr & 2Yr #yield are underneath the crisis levels.
The 10Yr is currently at those levels & 30Yr is above said levels.
Makes one think....... How much longer can #banks support these levels?
CRYPTOCAP:BTC AMEX:GLD AMEX:SLV
------------------------------------
Digesting longer term data = 10 & 30Yr #yield.
Higher lows
Bullish moving average crossover > circles
Moving avgs trending higher
Forming small uptrend
2nd pic = WEEKLY
Back above previous uptrend
Trading under moving avgs
TVC:TNX #Gold #silver #BTC
Update: Here is the fundamental and TA for Crude oil PricesWednesday we had inventory reports that showed an increase in US oil production combined with the feds hawkish interest rate sentiment which sent prices deep into discount. OPEC did announce they will be cutting oil production while US supply did increase apparently, US production has slowed down the last 18months. I believe next week this will start to reflect in the Crude oil inventory report, if economic data starts lessen it will give us a strong push to the upside amid the rising tension in the middle east (OPEC cuts and Nile attacks).
source:
www.nasdaq.com
$DXY, long and short term rates looking betterGood Morning! Let's get it done!
Look at #yield for 1yr - 30Yr. What do you see?
Last week we said they looked 2b bottoming out a bit.
Do any of these look weak to you?
RSI above halfway point, solidifying the possible bottoming process.
Short term
#Interestrates keep testing the top part of the white line. The more something is tested the weaker it becomes and the higher the chance of it breaking through.
Long term
Forming higher lows.
TVC:DXY
XAUUSD-SHORT THESIS-Wed Jan 31st-Fed EventShort Meltdown Incoming!!!
Entry positioned in London High, which turns out to be NY session Fibonacci point, also alligns with classic Fib retracement Golden zone. Stop loss above daily high. Profit target from 2020s and lower. From my fundamental part of analysis, my take is that Fed won't cut the rates and that press conference as Fed statement might be very hawkish, that concludes my target at 1996.00
*SELL LIMIT:
-ENTRY: 2041.00
-STOP LOSS: 2049.00(80 pips)
-TAKE PROFIT: 1996.00(450pips)
Discussion of Levels before the FOMC January 31st
DXY: (Fed Decision) Stay below 103.80 could trade down to 102.70 support.
NZDUSD: Buy 0.6150 SL 15 TP 40 (DXY weakness)
AUDUSD: Sell 0.6585 SL 15 TP 60 (DXY strength)
USDJPY: Sell 147.10 SL 30 TP 200 (Hesitation at 146.45)
GBPUSD: Buy 1.2715 SL 20 TP 60 (DXY weakness)
EURUSD: Sell 1.0790 SL 15 TP 45 (2nd setup) Sell 1.0730 SL 20 TP 70
USDCHF: Consolidation, possible straddle
Buy 0.8655 SL 20 TP 55
Sell 0.8600 SL 15 TP 40
USDCAD: Sell 1.3400 SL 20 TP 50
Gold: Break above 2040 trade up to 2055 (Conflict escalation & DXY weakness)
Gold forecast: Crazy to expect rate cut tomorrow? Gold forecast: Crazy to expect rate cut tomorrow?
Mostly yes. Market consensus leans towards the U.S. central bank maintaining current interest rates following the conclusion of its two-day meeting tomorrow. However, the potential impact on the U.S. dollar and gold is likely to hinge on statements from Fed Chair Jerome Powell regarding expectations for a rate cut.
While there is an anticipation of a somewhat dovish shift from Fed officials in the market, the robust January data and the positive JOLTS job report this morning present a case for the possibility of a sustained hawkish stance,
The JOLTS report revealed that U.S. job openings in December surged to 9.026 million, surpassing the expected 8.750 million and marking the highest figure in three months.
XAU/USD was trading in the green for a second consecutive day before the JOLTS report. Gold is currently above a mildly bearish 20 Simple Moving Average for the first time in over two weeks, with longer moving averages situated significantly below the current level.
Still, gold has breached its minor downtrend line originating from the early January high raises the possibility of a bullish target towards $2055, presumably reliant on the possibility of a Fed rate cut (or not).
edges up as US inflation print fuels Fed rate cut speculation 26 January 2024, 17:04
•EUR/USD rises in North American trading, buoyed by softer US core PCE inflation data.
•Fed's core PCE index fall to 2.9% raises hopes for interest rate cut, aiding EUR/USD's climb.
•Mixed European signals: German consumer confidence falls, Spanish unemployment at 16-year low, ahead of Fed decision.
The EUR/USD gained some 0.14% in early trading during the North American session as prices in the United States (US) remained above the US Federal Reserve’s goal but eased compared to November’s figures. The major trades at 1.0866 after diving to a low of 1.0812.
The Euro got a life-line of a softer US PCE report
The Fed’s preferred gauge for inflation, the Personal Consumption Expenditures (PCE), rose 2.6% in the 12 months to December, as expected on an annual basis, while core PCE dipped from 3.2% to 2.9% and below forecasts. After the data, the EUR/USD climbed sharply and clocked a daily high of 1.0885 before retreating toward current exchange rates, as the data reaffirmed investors' speculations that the Fed could begin cutting rates by the summer.
The CME FedWatch Tool depicts the odds for a quarter of a percentage rate cut by the Fed at 51.4%, while 50 basis points stand at 37.8%. Nevertheless, US Treasury bond yields reversed its course, climbing higher and putting a lid on the EUR/USD rise.
Meanwhile, data across the pond showed that German consumers remain pessimistic amidst economic uncertainty after the GfK Consumer Confidence for February plunged from .25.4 in January to -29.7. In Spain, the Unemployment Rate fell to levels last seen in 2007, from 11.84% to 11.76% in the last quarter of 2023, according to an INE report.
Ahead of the next week, the main spotlight would be the Federal Reserve’s monetary policy decision on January 30-31.
EUR/USD Price Analysis: Technical outlook
Following the US data release, the EUR/USD advanced towards 1.0900 but failed to break yesterday’s high, which could pave the way for a pullback to the 200-day moving average (DMA) at 1.0843. Downside risks are seen at today’s low 1.0812, followed by the 1.0800 figure. Conversely, if buyers lift the spot prices above 1.0900, as they eye the 50-DMA at 1.0920.
ECB maintains interest rate at 4.50% but for how long? History of prior EU Rate pauses:
4 months | Oct 00 - Apr 01
12 months | Jun 07 - Jun 08
3 months | Jul - Oct 2011
4 months | Sept 2023 - Present ⏳SO FAR⏳
At least they could say that this is not the shortest one ever now that we are into month 4.
Historical Average: 6 months (March 2024)
Interestingly this is when the Bank Term Funding Program in the US is ending which was providing liquidity to the banks. It might be a case of one foset gets turned off and another gets turned on.
PUKA
Interest Rates Trading and Hedging Through a New LensIntroduction
In the dynamic world of financial markets, Micro 10-Year Yield Futures stand out as a pivotal tool for traders and investors. These futures offer unique opportunities to navigate the complexities of interest rates, particularly in an environment influenced by key economic indicators. This article delves into how traders can leverage both fundamental economic data and a novel technical analysis approach to optimize their strategies in trading and hedging with these futures.
Fundamental Analysis Approach
Understanding CPI, PPI, and Unemployment Rate:
Consumer Price Index (CPI): This indicator measures the average change over time in the prices paid by consumers for a basket of goods and services. It's a critical gauge of inflation, directly impacting interest rates and, consequently, the yields on Treasury securities.
Producer Price Index (PPI): PPI tracks the average change over time in the selling prices received by domestic producers for their output. It's a leading indicator of consumer inflation when producers pass on higher costs to consumers.
Unemployment Rate: This key metric reflects the number of unemployed workers as a percentage of the labor force. It’s vital for assessing the health of the economy, influencing monetary policy and interest rates.
These indicators, notably their changes, provide crucial insights for active trading, particularly in hedging strategies with Micro 10-Year Yield Futures. For instance, a higher-than-expected CPI or PPI might signal rising inflation, prompting traders to anticipate rate hikes and adjust their positions accordingly.
How to incorporate Fundamental Analysis into the trade decision process?
When making trading decisions for Micro 10-Year Yield Futures, it's crucial to understand the impact of economic reports on interest rates:
Buying (Long) Position Rationale:
When CPI, PPI, and Employment Rate (opposite of unemployment) are all increasing (indicated by green color on the chart), it typically suggests an expanding economy and potential inflationary pressures.
In such scenarios, interest rates are likely to rise to manage inflation. Hence, buying 10-Year Yield Futures could become a strategic move, anticipating a potential uptick in yields.
Selling Existing Long Positions:
A decrease in any of these indicators (CPI, PPI, Employment Rate) signals a potential slowdown or less aggressive inflationary pressure.
Traders holding long positions might consider selling to lock in profits or prevent losses, anticipating a potential drop in yields.
Selling (Short) Position Rationale:
If these reports show a decreasing trend (indicated by red color on the chart), it suggests economic contraction or reduced inflationary pressure.
Lower interest rates are often introduced to stimulate economic growth in such conditions. Shorting 10-Year Yield Futures could be advantageous as it would benefit from a potential fall in yields.
Buying Existing Short Positions:
An increase in any of these indicators (CPI, PPI, Employment Rate) signals a potential expanding economy and potential inflationary pressures.
Traders holding short positions might consider buying to lock in profits or prevent losses, anticipating a potential rise in yields.
Rationale Behind the Rules:
These rules are based on the traditional economic relationship between inflation, economic activity, and interest rates.
Rising inflation or strong economic growth (indicated by higher CPI, PPI, and Employment Rates) often leads to higher interest rates to prevent the economy from overheating.
Conversely, decreasing indicators suggest an economy that might need stimulation, often leading to lower interest rates.
By aligning trading strategies with these fundamental economic principles, traders can make more informed decisions, leveraging economic trends to speculate or hedge effectively.
Technical Analysis Approach
Yield Extremes and Curve Analysis:
This approach involves charting and combining the 2-Year and 30-Year yield futures contracts in one chart.
Analyzing the relationship between these yields provides insights similar to traditional yield curve analysis in a much more accessible format.
Key Indicator: A crossover between the 2-Year and 30-Year rates signifies a substantial shift in market sentiment and economic outlook.
How to Incorporate Technical Analysis into the Trade Decision Process?
As said, the crossover of yield rates between the 2-year and the 30-year yields is a pivotal event, suggesting significant changes in the yield curve. Here's how to interpret and act on these occurrences:
Identifying the Crossover Event:
A crossover event occurs when the 2-year yield rate overtakes the 30-year rate, or vice versa.
This event is indicative of a significant change in the interest rate environment, reflecting shifts in economic expectations and monetary policy.
Trading Strategy Based on Micro 10-Year Prior Price Action:
When the crossover occurs, the immediate strategy depends on the recent trend in the Micro 10-Year Yield Futures prices.
If the Micro 10-Year Yield was trending upwards prior to the crossover, it suggests bullish sentiment in the shorter term. In this scenario, traders could consider taking a short position, anticipating a potential reversal or bearish shift in the market.
Conversely, if the Micro 10-Year Yield was trending downwards, indicating bearish sentiment, traders could consider a long position post-crossover, capitalizing on the potential for a bullish reversal or recovery in prices.
Rationale Behind the Trade Rules:
The crossover event between the 2-Year and 30-Year yields represents a pivotal shift in market dynamics, often reflecting changes in economic policy, inflation expectations, or investor sentiment.
Prior price action in the Micro 10-Year Yield Futures provides a context for these shifts, indicating the market's prevailing trend and sentiment.
By aligning trading actions with both the yield curve dynamics (crossover event) and the recent trend of the Micro 10-Year Futures, traders can make informed decisions, leveraging the market's anticipated reaction to these significant economic indicators.
Market Outlook and Trade Plan
Keeping in mind the below tick and (Average True Range) ATR values, based on our analysis, we could express our market views through the following hypothetical set-ups:
Trade Plan for the Fundamental Analysis Approach:
ENTRY: Wait for the next CPI, PPI and Employment Rate reports and consider executing a trade if all 3 reports are either positive (long) or negative (short).
STOP LOSS: Located 1 Monthly ATR away from the entry price
Trade Plan for the Technical Analysis Approach:
ENTRY: The crossover may confirm itself at the end of the day. Wait for such confirmation and consider executing a short trade once confirmed.
STOP LOSS: Located 1 Monthly ATR away from the entry price
Tick Value: 0.001 Index points (1/10th basis point per annum) = $1.00
Monthly ATR: The average volatility is measured as 0.509 at the time of this report
Trade Example: If the 2-Year yield rises above the 30-Year yield amid rising CPI, consider a short position anticipating rate hikes.
Reward-to-Risk Ratio: Calculate this ratio to ensure a balanced approach to potential gains versus losses.
Risk Management in Futures Trading
Effective risk management is paramount. Utilize stop-loss orders and consider hedging techniques to mitigate potential losses. Understand the significance of economic reports and yield curve shifts in making informed decisions.
Conclusion
Micro 10-Year Yield Futures offer a versatile platform for interest rate trading and hedging. By combining monthly economic updates with a unique yield curve analysis approach, traders can navigate these markets with greater confidence and strategic foresight.
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.