Introduction to Bond Trading Concepts

Oct 13, 2024

ICT Bond Trading Concepts Lecture Notes

Introduction

  • First lesson in ICT Bond Trading Concepts
  • Reminder: Not licensed CTA, content is for paper trading only

Treasury Bond Overview

  • Focus: 30-Year Treasury Bond Futures Contract
    • Trade symbol: ZB
  • Trading session for analysis: New York session (8:20 a.m. - 3 p.m. NY time)
  • Contract delivery months:
    • March (Code: H)
    • June (Code: M)
    • September (Code: U)
    • December (Code: Z)
  • Chart format example: ZBU17 (September 2017 contract)

Opening Range Concept

  • Highest volume: 8 a.m. - 9:30 a.m. NY time
  • True trading day: 8 a.m. - 3 p.m. NY time
  • Opening range: 8 a.m. - 9 a.m. NY time
    • Usually creates the day's high or low
    • Potential setups: Bullish/Bearish order block, liquidity void, fair value gap

Example Analysis

  • Example 1:
    • 8-9 a.m. defines opening range
    • High volume between 8 a.m. and 9 a.m.
    • Lower low post 9 a.m. with lower volume indicates stop run
    • Volume divergence suggests weakness in downward move
  • Example 2:
    • 8-9 a.m. opening range
    • Price trades into bullish order block
    • Higher high post 11 a.m. with declining volume
    • Early volume divergence signaled weak rally
  • Example 3:
    • 8-9 a.m. opening range
    • Bullish order block within opening range
    • Price runs stops above opening range high with low volume
    • Closes in fair value gap

Trading Strategy

  • Incorporate body and wicks of candles, previous highs/lows
  • Look for signals around 8:20 a.m. NY time
  • Focus on less manipulated markets like bonds
  • Avoid trading around FOMC, interest rate reports, NFP

Bond Market Advantages

  • Highly liquid, less manipulation compared to Forex
  • Good for swing, short-term, and day trading
  • Opportunities: Fair value gaps, liquidity pools
  • Typical daily range: 5-8 ticks
  • Large range day: 32 ticks ($1,000 per contract)

Developing Trading Skills

  • Recommended to study bond market daily
  • Enhances price action skills and understanding of related markets (dollar, gold, foreign currencies)

Conclusion

  • Introduction to bond market and analysis
  • Next lesson: Split session rules