Discovery Trading Group
@discoverytrader
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A unique NO-GURU dojo providing collective mentorship to traders since 2010. Focus on bespoke strategy & risk model development. Tweets NOT investment advice
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Joined January 2011
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As many know we’ve never really marketed DTG. We’ve purposefully kept it small & those who belong always just seem to find us. There’s never been a video encapsulating what the ‘dojo’ is REALLY all about. So after nearly 14 years, I finally made one.✅
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Probably the most asked question I get on this feed is how to access & plot all the government/cash fixed income data/history, rates/term structure curves, economic data/history, live news feeds/machine read conferences, etc. I regularly post here…(cont)
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@gutsareon
…99% of retail traders in any outright market are singularly focused on binary winning or losing in a vacuum. On each single occurrence they think it’s directly related to doing something “right” if they win or doing something “wrong” if they lose…
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My boy Conks hits another one out of the park (I know, when doesn’t he? -broken record) with a good synopsis of mechanics leading to repo crisis like the one in ‘19. I could go on but I’ll STFU now so you can read it. 👊
Despite the Federal Reserve’s stealth easing programs persisting, dollar strength has begun to accelerate. Yet as liquidity drains, the world's response will not be to de-dollarize but to seek more dollar liquidity. The Fed’s global swap network is set to expand... 1/
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Another great thread from Conks (who I recently called a rockstar for what it’s worth. Don’t do that much…👊)
Monetary leaders are about to uncover the inner workings of an obscure $2 trillion market, the most opaque ecosystem within the U.S. dollar funding complex. This, however, is not the much-hyped Eurodollar system. The Repo Market Blindspot™ is about to be unveiled... 1/
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Youngsters take note. I know, I know, you’re a pup & ready to rule the world & think you’re all that & a side of fries. Been there/done that. One day you’re gonna realize you’re not as smart as you think. Trust me. So to survive till then, listen to us old folks. Be humble. .02
I am wrong more than I’m right
That’s just risk management
I’ve survived 40 years of this
It’s always about risk management
This is a risk management moment
Don’t be stubborn here
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Arguably the most important source of potential edge you will find folks especially when paired w/fundamentals. Historic prints a huge source of exploitable potential fear/greed responses which ultimately drive all auction markets regardless of strategy/periodicity specifics. .02
If your not looking at volume traded at price, as a part of supply and demand you missed one of the edges I learned on the floor
Your job is to know where volume trades and note price for the future
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Listen to brother Pax kiddies. You might think some of us are older than dirt - & maybe we are. But you can’t buy mileage & these old dogs can still hunt. Flat is part of your P&L too & will often be your MOST profitable trade. You can’t lose what you don’t put in the middle.👊
I have traded through every event since 1997. I know how to trade extreme volatility. Despite what “traders” who flash super cars & jets say-this is NOT a get rich quick scheme. Be careful! When in doubt-stay out. Use stops on EVERY trade. Be aware of the limits.
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@dampedspring
Oh Andy I’m so sorry. Deja Vu. 3w ago my dear little buddy was 100%…then I noticed he didn’t finish his food one day. Then the next not at all. I hand fed & med him every day for two weeks but couldn’t save him. Aggressive bone cancer. Just 10 years old. My heart is still 💔
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Rest in peace Jim. A kind and generous man with a legendarily sharp mind and tireless work ethic all would do well to emulate. You will be missed.😢
It is with great sadness that the Simons Foundation announces the death of its co-founder and chair emeritus, James Harris Simons. Jim was an award-winning mathematician, a legendary investor and a generous philanthropist.
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Been meaning to tell you Nik this work you’ve done is really impressive. Just not something you typically see at the retail level. And for whatever it’s worth your quants seem to do a good job at parsing the data & delivering consistently plausible thesis’s. A+ brother, truly.👌
Dip buyers are keeping stock indices bullish, with RTY lagging—a sign of slipping economic data. Oil has quickly dropped to the low 70s as predicted, now overextended to the downside; not a time to buy dips, but covering shorts is advisable.
The dollar remains bearish while
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@gutsareon
@Belatoshi
Peter and I are going to do an informal joint webinar soon on all this stuff and crossover from traditional markets to crypto. I have just been insanely busy and need to figure out when we can both do it/record it. Stand by to stand by.
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Well here you go again STIRs traders. One of a very small handful of key
#SOFR
flys coming into this week’s
#INFLATION
data. Front 6M
#SR3
fly M3-Z3-M4 with another initial 25 bps of likely upside or downside on significant beats or misses. Buckle up…😉
#CPI
#PPI
#SENTIMENT
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Textbook trapped seller flush/stop run play and several delta/finish divergent rotation ops on expiration Friday in the Spoos for the closing range scalpers coming into the cash close. Good stuff… $ES
#SPX
#SCALPING
#ORDERFLOW
#VOLUME
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I was asked about why there are differences in
#TEDSPREAD
values/plotting, so here’s what you should know. The acronym “TED” is derived from
#TREASURIES
minus
#EURODOLLARS
& expresses the difference between theoretically risk free yield & yield with embedded credit risk (cont)…
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My brother from another mother Nik was just interviewed in this podcast. Through DTG over 13+ years I’ve watched a LOT of traders through their journey & sadly it’s so rare that any EVER really “get” what it’s really all about. Fortunately Nik got it & got it relatively early.👊
If you want to know about the life of a wondering Carnival Freak 🎡. Here you go!
I thoroughly enjoyed sharing my experiences and journey. If you find it insightful, please feel free to share it. Blessings 🙏
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Certainly no sign of any imminent
#FED
pivot for next year in the gold standard for forward key rate expectation,
#OIS
swaps. Note terminal
#EFFR
pushing high side of 475-500bps target range with highest expected yield now landing end of ‘23 into ‘24.
#INFLATION
$FF $ZQ
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Re-launch of 3M bills futures is here folks. Pre-open Globex book action Sunday will be very telling as to how strong interest will be from T1 MMs for cash arb & cross product spreading. “New” Merc products rarely blast out of the gate, but these just may be an exception.
#TBF3
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@NikLentz
@Dcpcooks
@GtcTraders
You’re more than welcome Nik. I think I speak for all of us when I say your enthusiasm/willingness to work is what draws us to you - other than we really do love you as a person. I always say THE most important trait of a great trader is a curious mind. You’ve got it in spades.👍
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@Will_DeCotiis
Not for nothing but I read these stories & see the numbers & can’t help but think…why so many live right on the ragged edge of their means? Use nearly all liquidity for down payment, monthly nut plus expenses every bit of what they earn. One hiccup & game over. Common tale. .02
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@gutsareon
Ahh yes, who’da thunk it…13 years later after the term was coined 5 minutes before some impromptu webinar content, my term ‘Mouse Trap’ would be alive and well and applied to cryptocurrency of all things. Go figure. Makes me feel like I’m 700 years old that’s for sure. Haha.
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Seems like I’ve been surprised a lot of late how many newer aspiring screen traders aren’t aware of this age old core lingo that makes communication efficient. If you’re one of them, you definitely should at least learn the few presented here. .02
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@gutsareon
…and that my friends sums up where the majority of edge lies in all markets. Plots of history no matter how slick you think they are…are just that - history. Professionals trade what IS, manifested by and against retail trading what WAS. 🤫
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Lots of chatter comparing bank fear stuff w/2008. Don’t fall for fear porn. COULD it become a similar (but different causes) mess if not contained? Sure, but until then absolute TED spread values illuminate the difference. 3M
#SOFR
TEDs are 45bps, not 450bps.
#SR3
#EURODOLLAR
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Exactly right. Like I always say guys your edges (should you find any) will always be SMALL and come from many sources/parts of your strategy/risk overlay. Stop looking for/expecting big edges. They don’t exist any more and that’s more than OK. .02
Have you read the prospectus for the Blackrock Bitcoin Trust (IBIT)? It’s 102 pages of industrial-strength legal language, as prospectuses invariably are. Chances are that 99% (if not 99.999%) of the people with positions in IBIT haven’t read it. I can absolutely guarantee that a
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@wrixjetski
@gutsareon
Also would be a good time to remind the crypto guys using orderflow that prints alone will never be sufficient as a process. The intersection of context, structure, price action and most of all your risk model are where you’ll find edge…
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@wrixjetski
@gutsareon
Guys, here are a couple more old MTS bootcamp presentations which condense the info in the three OG marketdelta webinars into one:
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@Dcpcooks
mentioned the size of the
#EFFR
swaps market earlier. Yes, still the mightiest of the mighty in terms of net risk out at any given time. For those who don’t know LCH in London clears 90%+ of all rate swaps. Currently north of $220 trillion out in JUST dollar denom
#OIS
@Dcpcooks
@DannyDayan5
Here’s the current chain. Data glitch in 18M tenor for some reason. Still 500-525 bps target expect paying 502 fixed 15M out tho.✅
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@GtcTraders
@W98AB
@Dcpcooks
@NikLentz
Forward EFFR swaps pricing still not convinced on the timeline. Still pricing 500-525 bps policy range 3M out, 475-500 bps 6M out and 425-450 bps 1Y out.
#OIS
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I’ll second that. No doubt in my mind. In fact I told him just the other day I believe there are certain traits and aptitude you either have or don’t, and he’s got it. See it a mile away.✅
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@gutsareon
Yes, as I mentioned when you DM’d me Peter virtually no institutional or pro prop speculators are trading any of these markets outright. Most either trading cross basis or inter crypto market spreading. Too much delta and Vega risk for most pro appetites .02
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@Dcpcooks
It’s pretty epic in terms of shortness of total elapsed time. Especially in the whites. .02
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#SOFR
curve progress plot by request. Just prior to DEC
#FED
meeting in orange, just after in white, & now in blue after the hotter than expect
#JOBS
data Y/D. Biggest yield peeling from red packs out as to be expected. Portly woman maybe hasn’t sung just yet.🎤
#SR3
#INFLATION
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Some more
#NOSTALGIA
for you. Before the
#SMARTPHONE
(before the
#INTERNET
even), electronic
#ORGANIZERS
all we had for storing data portably. In the very late 80s a whopping 32KB(!) was a big deal up from 16KB prior. By the mid 90s we were killing it w/HALF a single megabyte.😂
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@TheBondFreak
Every time I read one of his pieces I let out a little sigh. Call it arrogant or whatever but I consider myself a pretty smart guy when it comes to finance - except in some circles. He always reminds me I’m missing something in analysis & makes me feel stupid
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For those of you pursuing liquidity provision/tick scalping/book flipping oriented strategies, though I haven’t seen it personally I’m sure many will find this valuable in some way. Gary is a sharp old school guy. 👌
Out Today - Steve Leigh Recording, Market Making Scalping Manual -
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Ok so in response to a question on forward rate agreements I thought I would do a short thread on
#SWAP
varieties. First, an
#FRA
is a ‘one and done’ exchange of fixed for floating cash flows on a notional amount that settle at the start of the forward period (cont)…
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@TheFlowHorse
…case in point most CTAs trading the most most $ are exclusively trend following but in 50+ mkts at once. Most top of book MMs are running fixed equity % AND fixed tick R/R models. Legging long low/short high key for spreaders & catching knives very profitable for many scalpers.
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@NikLentz
@Dcpcooks
@GtcTraders
@Jimmyjude13
@dampedspring
Oh thanks Nik. I’m sure the others would agree we all learn from each other, including from you. And I’m sure they’d also agree what you’ve worked on and accomplished is really impressive.👌
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@gutsareon
@abetrade
…yes, it was actually a 3 webinar series on market structure, price action and orderflow. Links to all three are on the front of our site :
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…for anyone interested
#METASTOCK
has been kind enough to extend a really nice evaluation deal on
#XENITH
to our followers. Use this link to get 3M for the price of 1M. It’s DEEP so you’ll likely need it to check it all out. Cheers.
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Thought it common knowledge by now aggressive size had nothing to do with the meat of the Flash Crash. Let’s just keep pretending the half dozen small lot passive T1 MMs controlling the top of books pulling bids & shutting execution servers down didn’t.🙄
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I almost don’t want to post these anymore.
#BROKENRECORD
. Pullback rotation from
#ISM
release vol holding our old pal neg 100 from above in the front white-red spread. Go figure…😉
#SOFR
#SR3
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Thought of the day: despite maybe seeming particularly debatable lately, the world is still full of kind, honest, thoughtful people. If you can’t find one, BE one.👊
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@Dcpcooks
@palantirbull1
@BlacklionCTA
@donnelly_brent
@TheFlowHorse
@paxtrader777
@Jimmyjude13
@SPUSoccer
@Chris_C_Cady
@AaronRentfrew
@TheWineSwine
@eliant_capital
@mlabs0967
@spiralcal
@ChrisDMacro
@ChiTown_A
@JimScalpert
@PutSellerPablo
@686Prism
@TimTheMM
@therobotjames
@NikLentz
Yes he is. 👍
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@charliebilello
Seems like yesterday strangely. But perhaps even more interesting, the last time even 6M
#TREASURY
yields were this close to
#SPX
earnings yield was in the late 90s. Of course this vs
#INFLATION
bleed on RF cash is another story & the “is cash trash” is debate alive & well. .02
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@pyquantnews
Assuming you’re a bonafide non-professional you should also be aware of this as an alternative:
Probably the most asked question I get on this feed is how to access & plot all the government/cash fixed income data/history, rates/term structure curves, economic data/history, live news feeds/machine read conferences, etc. I regularly post here…(cont)
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Gotta love the questions I get from time to time out here. Someone asked for graphics of what
#CONVEXITY
looks like across current jacked up
#TREASURY
curve vs a more “normal” shaped underlying curve. Well, here you go - now vs exactly 2 years ago.👊 $ZT $ZF $ZN $TN $ZB $UB
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Much chatter around the member campfire lately on building CR
#SCALPING
& cash arb/premium filtered models. Lotta low hanging fruit in Spoos lately for sure. Several nice spots yesterday at rotation edges just ahead of the cash close as has been typical. $ES
#SPX
#ORDERFLOW
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A little food/thought before you get too excited about yield peel. Between SEP & OCT
#NFP
we saw significant steepening from mid curve out. But note post OCT into NOV data, curve retaining similar inversion. Until the front comes off that portly woman may yet have an encore.🎤.02
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Forum example as an adjunct to recent quarterly rebalance discussions. “Is CR flow typically unique on these days?”. Usually yes. Typical spike in print density driven by cash hedge flow/adjustments no doubt exploited by the closing range scalpers among us. $ES
#SPX
#ORDERFLOW
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@gutsareon
Nice. Old school. Nothing like PNF/reversal plots to show true rotations best in any market IMHO. Time based plots you get a “new” plot whether anything happened or not. PA directional -unable to PB one long bar. Moving sideways- many small bars. 👌
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Ok boys and girls the reds have now officially joined the pre
#JACKSONHOLE
/
#FED
speak ‘linear’ repricing party we’ve been talking about. Still for longer but not quite as higher says the forward term structure - today that is…
#SOFR
#SR3
#SR1
$FF $ZQ
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Snapped another flush/stop run/squeeze play Sunday for you crypto maniacs. Prior case high 515s test trapping loads of new sellers in pink setting the stage. Top of book MMs pull offers in yellow to goose the line. Pukefest in purple.
#BITCOIN
#BTC
#ORDERFLOW
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…in order to access all this if you’re a professional trader you’ll need either a Bloomberg or
#EIKON
terminal costing > $20k/yr. If you’re a retail trader thankfully a company called
#METASTOCK
markets a retail version of the latter called
#XENITH
…(cont)
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So…what do you reckon folks?
#CRUDE
gonna take another concerted run toward ‘22 highs before the portly woman sings her last tune? That little “less food/energy” filter can be a bi*ch in terms of the picture
#INFLATION
data does or doesn’t paint BTW. Just saying…
#OIL
$BRN $CL
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YES! Listen up guys. Wise words. I’m older than dirt as well as many know & as I keep harping on to anyone trading any single market short term strategy FORGET the 1-2-3 red light/green light fantasy. Markets always evolving & to survive you adapt with them or you perish. .02
I have been trading for 25 years. I have never used the same strategy 5 years in a row. I always have to reinvent myself. The longest stretches I have had were bonds 2002-07 & the 2yr 2013-18
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@gutsareon
Well you know I harp on this incessantly. In fact I’d argue that the risk model should be the foundation of any program AND the primary source of edge actually. 👍
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Perspective: While it’s true that -100 bps spread in U4-U5 has been scary ‘exact’, big picture wise price detail in this area is insignificant. Till we see at least half the ground retaken back towards -75 OR -125 relative policy range, nothing has really happened yet.
#SOFR
#SR3
I almost don’t want to post these anymore.
#BROKENRECORD
. Pullback rotation from
#ISM
release vol holding our old pal neg 100 from above in the front white-red spread. Go figure…😉
#SOFR
#SR3
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I snapped this late last night CST for you Bitcoin junkies. Short flush & puke fest past the Thursday high 594s and classic PB and hold of that line from above eventually trading into Wednesday high 828s structure a bit later.
#CRYPTOCURRENCIES
#BITCOIN
#BTC
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I was asked about relationship between
#FED
target &
#CPI
in the 70s compared to now. The widest the spread got becoming the catalyst for the biggest hawk cycle in history in the late 70s/early 80s was about 550bps w/
#INFLATION
about 2x the key rate (cont)…
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@TheFlowHorse
This thread is very revealing & hopefully quite helpful in exactly one respect to any aspiring. Countless seeking ‘generic wisdom’ & that’s the paradox. No such thing. ‘Wise’ always dependent on strategy, market, periodicity & risk/reward objectives. Square pegs/round holes. .02
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Spoos liquidity definitely freshening though it’s still a little shocking to me to see how thin the resting books have become sequela to now ‘standard’ smart synthetic order types driving remarkable execution efficiency. Still running < a tick & a half to get a 100 on.✅ $ES
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Why couldn’t the green pepper practice archery? Because it didn’t habanero. Bwahahahahahaha.🤫
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Not for nothing but forward rate agreements still pricing relatively rich 3-6-9 months out. Granted FRAs peg to synthetic
#LIBOR
so those fallback rate premiums over risk free are in there but still pretty sticky. ✅
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End of an era. As OI continues to bleed out of
#EURODOLLAR
mkts into
#SOFR
it still sort of freaks out us old guys it’s really happening. Eerie. Since time immemorial by FAR the largest futures markets in the world. Seeing single 000s in peak hours in the red pack? 😵💫 $ED
#LIBOR
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@gary_norden
…they’d actually prefer any trader not make money ironically. Lots of round turns & just make sure the long/short and/or non correlative book is square each day in terms of net exposure. Desk breaks even net/net but 5x fees on top of true cost to the firm & just keep spinning.
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Sustained repricing higher for (much) longer in greens through purples continues obviously. Though I have to say it’s fairly remarkable how linear it continues to be and how tight the yields are across those 16 quarters particularly. Not making spreaders real happy naturally…🤔
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@gutsareon
+1 there’s no magic formula folks. Regardless of market or strategy you never “know” anything tho millions out there claiming they can sell you the solution. Edge found over GROUPS of occurrences & will likely come from the risk model NOT your strategy. .02
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@EffMktHype
You’re killing me bro. I’m so sorry for your loss. Had to put my best friend down not long ago myself and I’m still not over it. He was a special one. Anyway, my condolences.
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Forward EFFR expects progress update. Now in orange, yesterday in purple and ahead of prior month
#CPI
in green. Linear sloping but small reprice from front maxing out at -10 bps or so 2Y out w/that corridor returning to where it was just ahead of APR
#INFLATION
data.✅
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@Dcpcooks
Low hanging retail fruit trading based on chart patterns/swings “obvious” in all intraday relevant timeframes. Flow showing significant piles of them framed up long or short inside said swing edge. Stage set…
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Not by request but I’m guessing a certain few people will be asking soon enough so…forward EFFR update via
#OIS
incoming…👊
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And this is why many old guard guys saying, “who knows when it ends exactly, but this can’t go on forever...”
Meanwhile, many younger guys saying, “yeah, but it’s different this time bro…”.
“Thank God for both…”. That’s what makes a market and that’s what I’m saying.👊
BREAKING: The stock market is in its longest stretch without a 2% sell-off since the financial crisis, per CNBC
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@Dcpcooks
As a fellow older than dirt guy (lol) from back in the day, I’ll add to the survival comment with one of my personal favorite sayings on the topic. Still holds true to this day…
It’s not what you make, it’s what you DON’T LOSE.
.02
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@Dcpcooks
@Econ_Parker
I definitely can’t argue with those numbers and I think it’s spot on actually. Though the wild card of course is if inflation turns the corner again and gets to raging then all bets are off. Got that funny anvil/piano floating over head feeling lately and it’s intensifying. .02
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@gary_norden
Yeah I’ve told the story before but in 2007 my barista was telling me what a great time it was to buy and/or develop more real estate. I thought to myself it must be time to sell. It was and I did...
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OK so final update as it were. White/red spreads still trucking back toward H4L town & front 12M spread has now officially filled the unauctioned gap above from the big reprice on the NFP miss Friday before last. Neg 75 on tap? All about
#CPI
from here folks…✅
#SOFR
#SR3
Meant to post this Y/D but note retest & big reject of that neg 85 post NFP high set last Friday. Likely get even bigger action on next retest with all that unauctioned air up there. All about the white/red spreads as everyone tries to figure out JP’s next move y’all. .02
#SR3
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Someone asked what I mean when I say “linear reprice” when talking about STIRs (or any other) term structure. It means most terms moving almost the same amount in the same direction. Curve happy w/shape just adding/peeling yield overall. NOT what spreaders want to see obviously.
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Listen, I just want to make clear as my sense of humor def not always obvious - but the topic isn’t funny. The one commenter is correct in that 26bps is the 3M ISDA fallback spread (11 bps for 1M & 43 bps for 6M). But why the “whatever the f**k that means” smartass-ing? (cont)…
How is it that
#TED
spread data is still available if panel banks stopped contributing in JUN I’m asked? Short answer is they did but FCA proposed that 1M, 3M & 6M cash rates still be published till SEP24 (!) “synthetically” - whatever the f**k that means…(see red highlight).🙄
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