Futures Trading: The ABCs

Futures trading is an exciting world. Being a confident and successful futures trader could lead to great profits. Similarly, a lack of a solid foundation and mistakes could lead to undesirable results. This article walks you through the basics of how to establish a concrete foundation to become a more confident futures trader.

How long does it take to learn the Bond Futures trade?

The core teachings at Masters in Trading starts with understanding the behavior of Bonds – and everything else sprouts from these foundational lessons of the yield curve.

For traders that are committed – it's best to take 1-3 months and grind, learn, ask questions, meet the crew… then, when you're involved in the discussion in the Discord community and maybe even helping a few newbies then you get in and “play the game.”

We preach slow and steady until you earn-the-right to trade bigger, regardless of how much capital you have.

Prove to yourself that this is a phenomenal investment for you and your family and once you do, then you earn the right to put your hard earned money at risk.

What will I learn in Bond Futures trading that I can't learn in other markets?

“Wow! I’ve never dug into or learned more about trade(ing) than this one Bond trade.  Made a few dollars in the process,too.  Thanks for challenging me, and especially thanks for the support.” – David M.

Uncovering opportunities in the bond futures market at MIT is not about luck or guesswork – it's driven to action based on data-driven decision making. We focus on identifying points of divergence across the yield curve and using these deviations as potential entry points into trades.

What becomes evident after learning such highly specialized skill sets is that these same methods can be applied with equal success when trading oil, commodities, volatility…it seems there may indeed be something unique about “trading curves”.

“I started trading in June of 2020. At the beginning I was ‘learning' technical analysis, but I never felt like it was a fit for me. Finding MIT in August felt like finding an oasis in the desert, and I haven't stopped drinking from the information firehose since then.”  – Terry K

How do Bond Futures traders make money?

“In your method of trading, everything is relative to one another. In the last 6 weeks, primarily trading bonds and pair trading with the mini futures,  I have put about 25 grand in the account” – Michael

[CASE STUDY] How One Trader Made $8,000 / Week Trading Bonds

What are the risks of trading Bond Futures?

The risk is that some of you will get excited when you enter the Discord community and try to keep up before having a complete understanding of the trade.

When Matt joined the community, his biggest weakness he shared was having a lack of patience which forced him to cover trades early.

“I was willing to lose the money I put on the line, but I would take profits way too early on winning trades. I wasn't letting positions breathe long enough for my winners to cover my losses.”

This is a common problem for traders. Steve W and I traded options on the front end of the yield curve last year.

Steve posted this in Discord

“I was in the same bond trade as JR, but I locked in profits waaaay too early, making like $5K on my 7 lot of bond options.  I was stoked! JR was in the exact same position, but he didn’t cover so quickly.  In fact, Jonathan held his position for just 30 days longer, and took $35K in profits on the exact same position.” 

If both of us would have done nothing, the position would be worth over $80K (on only $1500 risk).

My point is – with options, you're paying for time. Allow that time to work in your favor. Keep your risk small so you have the patience to sit and do nothing. And finally, lean on other traders in the Discord community.

What are some of the best strategies for trading Bond Futures?

I never felt confident trading with technical analysis as it always had a smoke-and-mirrors feel. Once I understood the basics of the bond trade, I finally felt confident about where I thought trades would go rather than trying to chase momentum.

Coming from a tech background I've always operated in a proactive mode as a reactive mindset doesn't survive in tech. This was my biggest internal hang up with the technical analysis style of trading.

After confidence came patience and letting go of the fear of missing out.

The fundamentals in the bond trade along with basic position management tips made the biggest impact on me. I love how simple the tools make it to see the relationships between markets and products. Also, the constant reminder that there is so much more to learn really helps me stay grounded.

How can I find a good Bond Futures trading mentor?

I posted this in Discord:

“I think it's very IMPORTANT for everyone to learn the BOND TRADE first.  All lessons stem from the bond trade.  All of it.  Learn to trade bonds, and the rest will make a lot more sense.  Learn each butterfly…. learn how to hedge curve risk.   And take your time.   If you trade in your first 3 months you will LOSE MONEY.   IF you patiently wait… learn as much as you can, paper trade… and then after you've put in the time, you will do great.   I've seen this so many times.   Watch youtube videos going back to 2015… the message is the same… the only thing different is the clients.   

I say this all with no nonsense LOVE. Please give us the benefit-of-the-doubt. Trading Bond Futures is a phenomenal trade for those who invest the time to learn. Thanks, I just wanted to let anyone know that it is new here that you are in the right place!”

What are some of the best Bond Futures trades?

Bond trading may have a reputation as mundane, but it is far from that. The craft of bond trades encompasses spreads, butterflies and outright trading – with Steve being particularly fond of implied volatility turnaround strategies!

“The turnaround trade is when the waters so to speak are calm and there isn't much news. In theory I believe the turnaround trade helps keep bonds from straying too far one way or another outside of big events; nonfarm payroll, unemployment, Fed talks, etc.” – Steve W

Louis was an ambitious trader who had quickly become successful in the relative value bond trade. He drew a lot of his success to the lessons he learned while trading bonds, comparing it to something that reminded him of his childhood – riding wild horses.

How can I practice trading bonds without risking any money?

All traders should practice trading futures on “paper” in a simulated account.  Stacy Brovitz CFA shared a funny story about trading in a sim account.

“A friend recently asked me if I still paper trade.  My answer was, “Of course!”  My friend then asked: “Haven’t you been trading for a long time? You still don’t know what you’re doing?”

I answered, “Yes,” and then, with a little irritation, “I paper trade because I do know what I’m doing. It’s my way of learning how to trade new instruments and strategies with no financial risk.”

When you’re in a trade with real money you’re paper trading should have prepared you for these two scenarios:

1. “The trade is going against you, what should you do”
2. “You’re sitting on a profit, should you get out?”