Difference Between Night and Day in the Futures Markets

Today’s Futures markets are divided up into multiple sessions. Unlike when I started trading there was primarily a daily chart only, no intra-day data was available unless you kept point and figure charts manually of intra-day price movements as many floor traders used to do. There was no electronic trading prior to or after a pit trading session. This meant all of the day’s activity was squeezed into about 7 or 8 hours of trading. The nice thing was that this increased volatility because Commercials had to make their big trading decisions during these same short hours. Today with the Financial Futures and some of the physical Commodities they are almost trading 24 hours per day, market participants are not confined to just the shorter 7 or 8 hours of a pit trading session.

When trading Futures contracts, traders are often faced with the dilemma of which session to use for trading. With electronic Futures trading the markets are now trading during times when the United States market participants are not as actively trading, this dramatically reduces the volume in a Futures contract. These two sessions are:

• Regular Trading Hours (RTH) – Trades during the highest volume session

• Extended Trading Hours (ETH) – Trades prior to and just after the highest volume session (Also called the Globex Session by some)

Both of these trading sessions can yield good trading levels, but there are times when the ETH session has such low volume that it makes it very difficult to find a good level to place a trade at. Therefore some traders prefer to use the RTH session to create their trading levels from. I can see validity for looking at both charts.

Gaps are much more common on an RTH chart and can create some strong levels for traders. However, sometimes these gaps can be large. When price begins to retrace back to these gaps there can be days of trading between the gap closing and opening prices in which there are no candles to the left. If the trader was looking at an ETH chart there may be candles trading between the gap during the night sessions, possibly creating some trading levels.

Since the RTH session plots data during the highest volume time of the day then the levels that get created will tend to be stronger because of the larger number of orders used to create the level and therefore possibly still have some remaining orders when price returns.

Each trader will have to decide if they find value in one or the other session or possibly both sessions. By back testing your levels over some historical data you should be able to form this decision.

Trade Station users can look at RTH charts for Stock Indexes and the 10 Year Treasury contract by entering their symbols, these are referred to as “.D” charts. Unfortunately there are no other markets that you can view the RTH sessions only by typing in their symbol. You can though create something called custom time sessions with Trade Station so you can view RTH charts of any market you wish.

Figure 1 illustrates an ETH and RTH session combined, All Session chart.

Notice the lower volume during much of the ETH session trading, but when the RTH session starts the volume spikes.

Figure 2 illustrates an RTH chart with only the highest volume periods of the day plotted.

Once you learn to create these time sessions you too will be able to see the difference between night and day in the Futures markets.

The following instructions were created by one of our outstanding Futures instructors, Craig Weil. If you click on his name you can see his bio and his trading experience from the trading floors of Chicago which certainly qualifies him to understand the Futures markets. Thank you for sharing this Craig.

How To Create An RTH Session Chart On Trade Station

(Instructions below are for the Crude Oil –CL contract)

1. Open An Intra-day 60 Minute Chart Of CL

2. Right Click On Chart And Choose Format Symbol

3. Choose Properties

4. Choose Session

5. Choose Use Custom Session

6. Choose Create

7. Name Your Session (I.E. – Energy RTH)

8. Choose Add

9. Name Your Session The Same As Step 7

10. Choose Monday for Start Day

11. Choose Start Time of 9:00AM (time is based on Exchange Time)Choose Monday for End Day

12. Choose End Time of 2:30PM (time is based on Exchange Time)

13. Check Box For “use this session as End of Day marker”

14. Choose OK

15. Choose Add — Monday-Friday

16. Choose OK

17. Choose OK

18. Choose OK

Other sessions you may want to create: Note, times are Exchange Time

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