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Why does the CL seem to be trending better overnight?


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Why does the CL seem to be trending better overnight?

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  #1 (permalink)
Spicewood
 
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Maybe one of you CL traders could explain to me why we are seeing many days recently the CL trend nicely overnight and then around 9am ET it settles into a relatively narrow trading range for most if not all of the morning. It has been doing this with such regularity that there must be a reason and I sure could use some education in this regard.
Thanks much!

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  #3 (permalink)
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allinfun1 View Post
Maybe one of you CL traders could explain to me why we are seeing many days recently the CL trend nicely overnight and then around 9am ET it settles into a relatively narrow trading range for most if not all of the morning. It has been doing this with such regularity that there must be a reason and I sure could use some education in this regard.
Thanks much!

No idea. Perhaps you may want to ask the question in this thread.

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  #4 (permalink)
San Diego, CA/United States
 
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I've wondered this as well and it's not just CL. One possibility is, there are less professionals trading after hours. Professionals generally have larger trading accounts, and seem to trade multiple batches for smaller moves, with all kinds of different trading tactics - which can cause choppy conditions.

Amateurs tend to have more of a follow the herd mentality, which causes more trend type behavior.

But like I said, this is just a possibility.

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  #5 (permalink)
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jeffro View Post
I've wondered this as well and it's not just CL. One possibility is, there are less professionals trading after hours. Professionals generally have larger trading accounts, and seem to trade multiple batches for smaller moves, with all kinds of different trading tactics - which can cause choppy conditions.

Amateurs tend to have more of a follow the herd mentality, which causes more trend type behavior.

But like I said, this is just a possibility.

Good reply and explanation.

Also, ETH will have more Algos / Bots (in ratio to human traders) that are trading in an automated fashion with little human interaction.

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  #6 (permalink)
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CenFlo View Post
Good reply and explanation.

Also, ETH will have more Algos / Bots (in ratio to human traders) that are trading in an automated fashion with little human interaction.

Don't you mean less algos/bots in the ETH session?
I would have thought there is a lot more algo activity in the RTH session, rather than the Asian and European morning session, because that is when the majority of the volume goes through and the large institutions, commercials and funds are actively trading or positioning.

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  #7 (permalink)
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matthew28 View Post
Don't you mean less algos/bots in the ETH session?
I would have thought there is a lot more algo activity in the RTH session, rather than the Asian and European morning session, because that is when the majority of the volume goes through and the large institutions, commercials and funds are actively trading or positioning.

I look at it in that the ratio to automated trading to real live (human) trading. No doubt there's a lot of program trading going on during the day, but there's also a huge amount of "real" traders in there.

I trade the ETH / Overnight sessions and often, even if I'm not trading I'm observing and there are some distinct trends that are easy to identify at certain time intervals. Nanex has run numerous studies and has presented some interesting data observations.

Edit: I should clarify that most of my observations are in reference to the /ES markets and not so much /CL which is the topic of this thread.

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  #8 (permalink)
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In markets like CL the term "overnight" is imho a bit misleading; better to call it Apac and Euro sessions. Crude is a truly international commodity and not tied too much to the US session, although that's still the most volatile part of the 23 hour day. I would argue that there is about the same share of retail vs institutional traders in the Apac/Euro sessions compared to the US session (including Algos), just less of them.

In my opinion, the observed phenomenon relates to time differences and news flow. CL is in a very tight contraction with historic speculative positioning - hedge funds playing the bulls, producers selling to them (c.f., COT reports). In that situation, movements are mostly news driven with lots of noise ... and major news drivers (i.e., OPEC compliance data) over the past weeks originate in Euro (Russia) / ME time zones ... apart from the inventory reports which are of course during US hours. Big houses have their trade desks manned 23/5 and react accordingly. So, sometimes the action is already over when you guys wake up.

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  #9 (permalink)
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Well #1, don't forget that crude is used world wide, not just in the US, so people will place orders accordingly. (compare this to say NG which is really just a domestic market)

#2, the orders coming in from the Chinese has been increasing exponentially, so need to account for Shanghai traders more than you had to in the past.

Finally, there's less liquidity, and therefore easier to move markets.

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