Using Globex Session Volume

Using Globex Session Volume

There are many inputs that traders use to try to come up with their “best guess” or hypothesis as to what the US opening session will look like. Some use the activity in the European or Asian markets to glean an edge. Others use price patterns on the Globex Session itself. Globex Session is defined as the trading period between 3:30 PM Chicago time and 8:29 AM the next day Chicago Time.

Those of you who have watched Webinar 4.1 – Daily Homework, we walked through the steps I use to come up with my hypotheses based on the last Regular Trading Hours (RTH) session. We then examine the Globex session the next day before the open to either adjust or add to those hypotheses. You also saw that I’m applying the same auction principles to the Globex session and try to get context from the composite to see the “bigger picture”.

So how does using Globex Session Volume fit into this? Looking at this metric is not exactly a holy grail of trading. However, it does provide additional indication of what to expect on the open of the RTH session following it. Here is a quick study that I did this morning just to update my research:

Click to enlarge

The normal volume for ES Globex Session is between 150,000 to 350,000 contracts. This represents what is considered “normal” which is the first standard deviation of the data set (68.2%). So this presents a couple of key scenarios that we want to look at:

  1. Globex Session volume is lighter than normal:
    • Market is anticipating a key economic release during the US RTH session
    • Market is in balance and there is no further information coming in to revalue the market. Therefore, everyone has taken their position and the market is ripe for a move away from an existing balance range (this is important)
    • Market is on holiday in Europe or Asia. Expect a lot of flutter at the open and then sideways action setting in quickly until the last hour or so of the RTH close
  2. Globex Session volume is higher than normal on a low range:
    • Roll-over effect
    • Market participants are loaded and are anticipating a break of the current range. The opening session likely to be aggressive and directional
      • If Out Of Range, then likely responsive movement would likely be limited and in the direction away from the gap is more likely
      • If In Range, then likely to have a shallow test and go into an OD, ORR or OTD opening type for a push given that so much energy has already built up for the move and so many participants will likely be wrong

As in all instances, a trader must tie this back to context. Where are you on the composite or on a much larger time frame than you trade? What has the market tested or done? How well did the test go of overhead areas and areas below? Where can it move to from here?

Most of all, what will YOU be looking for before the day begins? What where will you be wrong? How likely is it to go your way? Is your risk defined and have you accepted this risk as the “cost of finding out” as discussed in Webinar 3?

 

1Comment
  • hamish
    Posted at 17:20h, 27 December Reply

    Thank you for this. Lately, it seems the o/n markets have become increasely more important as they more often than not execute my RHR hypothese leaving me confused when I get up 6am pacific time !!!!!!!

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