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Greetings traders.. I'm a beginner with a basic question. When trading the ES at the open and during the first hour or so, should I be watching the es.d chart showing the overnight gap or the continuous chart? They are obviously two very different views of the same action.
Can you help answer these questions from other members on NexusFi?
I don't see any valid reason why you should be voluntary blind about what has happens during the night. ES is very active before the opening of equity markets. That is the main advantage of GLOBEX. There is no gap (it is not like stocks) so I don't see any reason to create an artificial one.
R.I.P. Olivier Terrier (aka "Okina"), 1969-2016.
Please visit this thread for more information.
You might want to look at non-time based charts, either tick or volume.
Here is a 30-minute chart of the full ETH (Electronic Trading Hours) for ES. Price did a lot of movement during the overnight hours, and it is often significant for the next day, but very few contracts actually changed hands, as seen by the minimal volume. So the overnight trading is often important, but the big trading doesn't happen then. Many people don't feel that it is as significant as the regular trading hours for that reason, but they want to know what happened then and what the levels were.
Here is a 30,000 volume chart (arbitrarily chosen because it covers a similar timeframe.) Each bar has the same volume, which means that the lower-volume overnight hours cover less chart space than the more intense regular hours. You don't lose the overnight info, but it is only given the significance it has based on its actual trading volume.
Tick charts would give a similar view as volume charts, but are based on the number of trades ("ticks" -- but not price ticks, confusingly -- different terminology), not the volume. They will be similar to volume charts because the average trade size doesn't vary much, and will also de-emphasize the low-trading time periods. Volume will vary a little bit, so if you use the volume levels in the lower panel, there will be some information about it there, but not as much as in a price chart. Here's a 10,000 tick chart (average ES trade size is a little less than 3 contracts, so this is not too different from the 30,000 volume chart):
Or, you can use something like the range chart that @Okina posted, which has bars of equal price size. These will show a larger overnight session sometimes, because the overnight price variation can be large even though the amount of actual trading activity is small then.
Which is "better"? There's no such thing.... it's just which gives you the information in the best way, for you.
Try experimenting with them, see what they each tell you. Tradestation supports all of them, I just don't use it and don't remember how you select them any more. Fool around with them, and with different bar size settings, and you will find what you like, and why.
Bob West's post above is obviously very good. I would add to that that in the current macro environment with both the Shanghai and Nikkei indexes causing a lot of volatility to extend previous day's ranges, then having both a "Brexit Risk" and more ECB QE, knowing what the price range is across both the Asia and European sessions is absolutely essential.
I use a continuous chart of ETH and RTH. I draw 5 lines: yesterday close high and low, and overnite high and low, as these often make support and resistance points in the opening hour. I try to narrate the play of RTH large volume and ETH low volume into a story for the day's action. I also treat the price action as continuous but with increased volatility for the opening hour.
Thanks, this is good too. The price action certainly does have a continuous connection across the different periods, and these support/resistance levels make sense.
Although I don't do this, I have also seen a pure time chart with trend channels drawn from the "pre-market" (re-RTH) period into the regular trading hours, and with a good argument that the resulting channels showed the trend more clearly because of using the non-regular hours this way. (Hi, @trendisyourfriend, I'm thinking of this chart you posted on my thread some time ago, which I do remember, and think about sometimes:
Do you also look at time based charts to figure out what price is doing?
I have compared your chart(3000 vol.) with a time based chart(3 min.). Using a volume chart it is not easy to determine price direction before the start of the day …
Consider watching them both. Why cut out any information when it's easy to plot. I watch gaps, the opening range and initial balance on my RTH chart but always have ETH on my second screen as the information adds value for trend identification and support and resistance levels. It's been more important recently to be paying attention to the 3 important market times ( Europe, Asia and US) and to be conscience of the other markets impact on the prevailing structure of the day- add to that the 2:30 ET when oil stops "pit" trading. IMO- volume profiles from RTH are more valuable as well as pivot points if you subscribe to random lines/ synthetic support/resistance.
I'm more familiar with NQ than ES, myself, but ... although it's difficult to add anything much to Bob's excellent post above (#4), if looking at "ES overnight", myself, I would certainly be trying to interpret it from volume-bars rather than from time-bars - and I'd recommend you at least to look at that approach.
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