10-Year Treasury Yield, 30-minute Chart

Once you get the basic technical trading principles down, you can trade anything that is liquid and active. Here's the Yield Chart for the 10-Year Treasury Notes. (You can trade options on US Treasury securities at the CBOE.)

So let's go through the steps that I've hammered home in 90+ lessons on Stock Trading for Dummies.

1) Is the Yield trending up or down? It's trending down obviously.
2) Do we want to get short or get long? We want to get short, either by buying puts or selling calls.
3) Where's a good spot to enter a position while limiting our risk? Beneath the closing price reversal UP bar in the morning at 4.264. If the trade goes bad, we will exit the position at 4.283.
4) If the trade goes in our direction, and yield falls to 4.245, we will tighten up the initial stop loss to reduce our risk.

The wrong way to play it would be to attempt to "pick a bottom," or fade the market; blindly enter short without waiting for a good spot; getting short without setting a stop, etc. The list of errors goes on and on, but people mainly make those three big mistakes.

Traders who know themselves, who have common sense, who are disciplined, and who have the ability to keep it simple will do just fine. Remember that many people in the market are either uneducated or uninformed. And most of the few who are educated and informed waste their time building "scenarios" and end up defeating themselves by trying to outsmart the market.

Previous Entry >>> Trading for Dummies, Q&A #94