New Mission, New Website coming soon! Learn more now.

Equities logo
Search
Close this search box.

Trading the Eurodollar

The Eurodollar market has seen strong and steady commercial buying dating back to last June. In fact, I wouldn’t normally show such a long dateline on a chart this size but that’s the
Andy Waldock, owner of the brokerage firm Commodity & Derivative Advisors and the subscription service COTSignals.com, is a third generation commodity trader with over 25 years of experience on all of the main U.S. exchanges. Andy stays abreast of modern programming developments due to the trading programs he employs for his own account and managed money. He can be reached at www.andywaldock.com.
Andy Waldock, owner of the brokerage firm Commodity & Derivative Advisors and the subscription service COTSignals.com, is a third generation commodity trader with over 25 years of experience on all of the main U.S. exchanges. Andy stays abreast of modern programming developments due to the trading programs he employs for his own account and managed money. He can be reached at www.andywaldock.com.

trading Eurodollars is that they are typically the most liquid contracts in the world but tend to have small ranges. Therefore, the key to profiting from the strategy is to trade multiple contracts. Given that the risk from the current price of 99.745 to the stop price of 99.730 is only $37.50 the multiple contract scenario can be viewed in the proper portfolio risk context.

The methodology is very simple. We look for short-term reversals in line with commercial bias, in this case long; to buy into the same positions commercial traders are carrying. Yesterday, the market traded below the support that had been building at 99.74 only to reverse and close at the day’s high of 99.745. This created a bounce in our proprietary short-term trigger. The buy signal is in line with the overwhelmingly positive commercial momentum. Thus, the commercial buy signal is complete.

Finally, we always trade with protective stops working in the market. This accomplishes two things. First of all, it allows us to quantify the risk on the trade which, in turn allows us to calculate the proper number of contracts to trade to achieve the desired portfolio leverage and risk levels. Secondly, it ensures that whether shots are fired in the Crimean peninsula or the Fed makes a surprise announcement, we’re covered. On the profit side, I’m looking for something above the recent highs, possibly towards 99.80 or more if things heat up geopolitically.