Charting the Futures markets is probably one of the most ambiguous parts of trading. Unlike charting the Equities and Spot Forex markets, Futures traders are faced with multiple styles of charts:
Contract Specific Charts
Adjusted (Backward & Forward) Continuous Charts
Un-Adjusted Continuous Charts
Seasonal Contract Specific Continuous Charts
All Session Intra-Day Charts
Day Session Intra-Day Charts
If the Futures industry could use standardization in any one area it would be charting. As difficult as it was many years ago using paper charts of just the entire days bar chart range it sure was nice knowing that we were all looking at the same charts. In my opinion it made it more fair. Today with all the technology we have to create charts, who knows what the majority of traders are looking at. Of course with the computers trading with each other today on the electronic platforms, I sometimes wonder if they even look at a chart.
As traders all we can do is strive for consistency. That means picking a charting style that makes you comfortable in making trading decisions and sticking to that style of charting. If you find yourself using many different styles of charts you might run into a situation where you are not consistently trading well or finding yourself paralyzed in making a decision because the charts don’t agree.
I would like to discuss with you the idea of using intra-day time periods that give you equal time periods for each market you trade.
To start with let’s review something called Regular Trading Hours (RTH). Most Futures contracts now trade for almost 24 hours per day. However this does not mean that the contract is as liquid (good trading volume) during the entire 24 hour period. The most liquid time of the trading day is referred to as RTH. Normally this time period is the same as when the trading pit for the particular Commodity Futures contract is open. Some markets do not have open outcry (pit trading) anymore. For example, the Inter-Continental Exchange (ICE) is a purely electronic market. Many of the products that trade on the ICE used to have trading pits. If you look at the intra-day charts for these products you will see that the RTH sessions will be the same as when the trading pits existed for these contracts. We are dealing with human beings and habits. This is perhaps one of the reasons we see this happening.
Intra-Day trading requires using a computer and along with computers come software applications to plot the data so we can make trading decisions. These charting packages allow the trader to view markets in different time intervals during the trading day. For many traders using the traditional time periods of 5, 15,30,60 minute charts is more than adequate. The one problem with using a standard time period to plot intra-day charts is that not all markets are open for the same duration each day. While a 15 minute chart for the Intra-Day Stock Indexes looks good it does not give you equal time intervals on the Intra-Day Gold chart.
The Stock Indexes RTH’s are 9:30 – 16:15 (EST) or 405 minutes per day. The Gold market RTH’s are 8:20 – 13:30 (EST) or 310 minutes per day. By using a 15 minute interval on the Stock Indexes you get 27 Candles exactly. If you use 15 minute periods for Gold you get 20.666 Candles. This means that the Gold market will end the day with an odd time interval every day and will have different Intra-Day chart patterns each day compared to a chart with equal time periods throughout the trading day.
Figure 1 shows some markets I created using these equal time periods for:
Figure 2 is a chart of the Mini S&P contract looking at the 30 minute interval. You can see that the 30 minute chart does not have an even number of Candles during the day (13.5 Candles).
Figure 3 is a chart of the same Mini S&P contract looking at a 27 minute interval. Figure 1 shows us we have an even 15 Candles every day using this interval.
As we look at the May 31 day session of the Mini S&P we can see some differences in these charts. Notice around the closing period of the day how the Candles have different highs and lows. This could be significant when it comes to setting your levels near gap days and placing your stop safely away from the price action. Notice also that Candlestick patterns appear differently on these two timeframes. While the 30 minute chart has a red Candle on the opening bar the 27 minute would have a green candle. The key is that using these equal time divisions on your RTH session charts can give you a completely different outlook on the market each day.
I have looked at these on the all session charts, but have not found a way to use them. The problem is that because the Stock Indexes open on Sunday night they are only open for 22 hours and 15 minutes. When the Stock Indexes open on Monday afternoon at 16:30 they are open until Tuesday at 16:15 or 23 hours and 15 minutes (including Globex maintenance shutdown). Therefore we cannot use an even time interval all week long to get equal time divisions like we can for the RTH sessions.
This may seem like a minor adjustment to make, but if you think about having a chart that has consistent time periods all day long it might make more sense to you.
“If someone is going down the wrong road, he doesn’t need motivation to speed him up. What he needs is education to turn him around.” Jim Rohn
Trade well my fellow traders,