By: Jeff Niles
The e-mini markets are a complicated. The ebb and flow of information and participation that comes out of the markets can be very strange to novice traders. As a trader's knowledge base expands, so too does their ability to recognize the components of a potentially profitable trading environment. In order to be a successful trader one needs a host of factors to be present before taking a trade. In the overnight session of the E-mini markets most factors that combine to make the e-mini markets a great place for short term investing simply aren't there. The exception is the European market opening.
The After Hours session is notoriously slow trading and the action only really picks up during the European market opening. The e-mini market plays very effectively off important technical levels during that time and if you watch that time period carefully you will notice that more often than not the best time to enter the overnight move is during the euro opening.
So why is the market so drawn to perform well during the European open?
The opening sees the return of institutional participation which means technical levels are much more likely to act as a bounce point. Retail traders are often uninformed on proper trading techniques and strategies and during the after hours session you will often see price action blow through important technical levels. Unintelligent traders ruling the low volume markets cause a lack of respect for levels. Good participation = high probability trading.
Low Market Orders
Unlike the US session opening, the European open is much less violent in terms of price action swings. Market orders are the minority and that means limit orders control price movement. Any time there is a limit order there is a pre-determined intelligent (at least in theory) trade being placed. Solid technical traders in the markets mean more predictable price action.
The E-mini S&P 500 has an uncanny ability to set up during the European open. As volume and participation come rushing back into the markets price seems to always be drawn to important levels. When those levels trade and are respected the moves can be very large in size and can last well into the US session. More often than not there is only one or two chances to get in the overnight moves and the European open is definitely one of them.
If you are going to look to trade the e-minis after US market hours, you can save yourself a lot of time and energy, by focusing only on the market after the European open. Good traders know that there is nothing more frustrating than watching a slow market and to keep yourself out of trouble you should optimize your time in the markets to the periods of heaviest volume. The European session offers the volume necessary to get some decent trades off.
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Disclosure: No positions