| |
Trading the Red Eye Express
By Tom
Busby
As a
general rule of thumb, people sleep at night and work during the day. The alarm
goes off, they get up, take a shower, and quickly catch the morning market news
on CNBC while drinking a cup of coffee. The market will be opening in an hour
or so, the pre-market data looks as though the market will open higher that
morning, and they can call their broker and sell their stock that has finally
gotten back to break even. However, what is not known is that the world has
been trading throughout the night while those here in the U.S. have been
sleeping. Not knowing what the world has done to our stock and futures can
impair a trader coming into the U.S. day market, and while you were sleeping,
somehow you lost money.
What
most do not realize is that the market trades 24 hours a day from Sunday night
through Friday afternoon. It is a global market that starts with Asia and ends
here in the U.S. Where ever the sun is shining, that is the market which is
controlling the flow of investment vehicles. Though just about every country in
the world has a trading exchange, only seven of them have the most influence in
the global market place: Japan, Hong Kong, Germany, Switzerland, France,
England, and the United States. If a trader follows the trends of these
markets, he will have a better understanding of the global movement and the
movement here in the U.S.
Trading at night is not something that most of us look forward to each day,
especially if you have a day job. Since sleep is one thing that humans must do,
if a trader is going to trade during the night session, an adjustment in sleep
habits will have to be made, unless you are an early riser to start with.
Another thing is picking the vehicle to trade at night. I prefer the S&P 500
futures and the German DAX futures, however, you can trade gold, silver, the
Nasdaq, or the DOW futures as well. The reason I trade the S&P and the DAX is
that the S&P futures are the king in the U.S. day market and the DAX is the king
during the European day market. Two vehicles based in two separate countries
trading at the same time.
The
S&P begins trading at 5:30pm CT on Sunday night and trades until 3:15pm CT on
Monday (this is one day of trading). It then opens at 3:30pm CT Monday and
trades until 3:15pm CT Tuesday. This cycle repeats itself until 3:15pm CT
Friday when the market closes for the weekend. This is virtually a 24 hour
market that spans the globe. With Japan opening at 6:00pm CT and Hong Kong
opening at 8:00pm CT, a trader can begin to trade the global movement early in
evening when the markets generally are very slow. He can then carry it into the
opening of the European markets at 2:00am CT. This is the same time the DAX
futures open, which is the leading contract during early morning trading. The
DAX closes at 1:00pm CT.
To
see the correlation between these two markets look at Charts 1 and 2. The
charts are 30 minute bars starting when the DAX opens at 2:00am CT. As the DAX
breaks after the first 30 minutes of its market, the S&P is following right
behind. The charts are virtually identical, and as can be seen, the DAX (Chart
1) has larger moves early and the S&P has larger moves late. Trading off of
pivotal numbers in both markets is crucial to being successful, and divergence
between these markets is a ticket to stay out.
Chart 1
Chart 2
Whether you decide to trade the S&P futures or the DAX futures is strictly a
matter of preference and time of day. However if you like being up early, you
can get the benefit of both of these markets and be profitable before the U.S.
wakes up. The old saying “the early bird gets the worm” holds true when trading
in the night market. Not only are you profitable early, but you have more
evidence of what the U.S. day market will bring forth.
For
more information about the German DAX index you can visit
www.hans.engelbrecht.com, and to learn more on trading the S&P e-mini’s go
to
www.cme.com.
|
