Trading Treasuries with the Footprint

Commonly traded Treasury futures are the 2yr note, 5yr note, 10yr note, and 30yr bond.  A majority of the volume in these instruments is from institutional traders. This creates for some interesting ways to apply the Footprint to these markets. The treasuries have a different "personality" than many of the commonly traded markets. They don't have near as much price volatility as other common futures contracts like ES, CL, or Gold, so what you normally see is a lot of volume trading at each price and the market "ratcheting" in one direction or another.

Two patterns to focus on when using the Footprint to trade treasuries are volume imbalanceclusters and large lot trades. Today we will show some examples of the volume imbalance clusters (VIC's).

A volume imbalance cluster is a series of sequential prices where a buy or sell imbalance is present at each continuous price. Often it is just 2 prices, but can be 3 or more. In the example below we see 3 back to back volume imbalances. This is often an important pattern in low volatility instruments because it signifies directional conviction on the part of traders, usually institutional.

4-8-16 TYA Sell Cluster High of day
4-8-16 TYA Sell Cluster High of day

Most often this pattern will become evident at extremes, which is a great place to be stalking trades. Below is an example of a range bound market (denoted by the dashed yellow line). Notice when price traded below support volume increased and a buy VIC appeared. This is very strong evidence of market participants buying outside the range and there is a high probability of price snapping back into range.

ONLY the Footprint chart can help you spot opportunities like this and help not get caught on the wrong side of the trade.

4-8-16 TYA Buying below consolidation
4-8-16 TYA Buying below consolidation

10 Year Treasury Futures

Here is another example, this time the market was falling and then capped off with a nice buy volume imbalance cluster. It was retested a few minutes later then completed the reversal. As you can see, VIC's provide excellent visual queues to trigger trading opportunities.

4-8-16 TYA Buy Cluster
4-8-16 TYA Buy Cluster

10 Year Treasury Futures

Here is an example that is less frequent but just as important. It was a trending market that had multiple buy volume imbalance clusters supporting the move higher. These clusters will very often serve as support zones on any intraday pullback.

4-8-16 TYA Buy Cluster Momentum
4-8-16 TYA Buy Cluster Momentum

10 Year Treasury Futures

Consider incorporating the Footprint chart into your trading. Take a trial or subscribe at www.marketdelta.com.

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