Trade to Win - Proven Strategies to Make Money

c11 JWBT016-Busby September 30, 2008 14:18 Printer: TBD

Cashing in on Bonds 125

FIGURE 11.2 The upward path of bonds after prices broke out of the range es-

tablished during the first hour of trading. The chart is a 10-minute chart on April 22,

2008.

There is a wide array of financial products to trade. If you have the

knowledge, it is possible to make money on many fronts. Thanks to that

article inFuturesmagazine and the DTI method, I have been able to in-

crease my moneymaking potential.

Review

Bonds are another way to make money in the markets. At the time of this

writing, I have one bond trade that I make often. In order to trade bonds

successfully, it is necessary to understand some basic facts. Bonds are debt

instruments, and interest rates and inflation affect bond prices. When in-

terest rates go up, bond prices come down. Also, there tends to be an in-

verse relationship between stocks and bond prices. The chart in Figure 11.1

graphically illustrates this relationship. As the S&P equity index futures are

going up, bonds are selling off. The bars are almost identical, but in reverse

direction.

I use the first hour of bond trading to establish some benchmark prices.

When prices go above the high of the range of the first hour of trading, I go

long; when prices fall below the low of that first hour, I go short. It seems