The market continually changes and a trader must keep his options open. Most traders only look at the day market between the times of 08:30 and 15:15 CT. However, while the traders in the U.S. sleep, the market continues to trade throughout the world. Depending on where the sun is shining, determines who has control of the market. Following the market throughout the world can give a trader the insight on what will happen during the U.S. day market. Though getting up early is sometimes hard, it can pay big dividends to those who choose to be the early bird.
The biggest problem with trading in the night market is the lack of “indicators” to help guide the trader. The S&P 500 futures open at 17:00 CT and close at 16:15 CT. Knowing this, the S&P futures trade virtually 24 hours a day. Taking advantage of the night market can help in determining how the day market will perform. But figuring out what moves the market can be baffling. The key to understanding the night market is who is controlling it. The first market to open is the Nikkei (Japan), followed by the Hang Seng (Hong Kong). These are the two primary Asian markets. How they trade will determine where the S&P will go. Asia has its own economy and its own news, and depending on how the news filters in, depends on where the market goes. The S&P futures will follow this trend while Asia is open.
As Europe begins to open, more evidence of market direction can be seen. Germany has the largest economy in Europe and its DAX futures reigns king during the European trading. Because of this transition, the S&P futures begin to follow the direction of the DAX futures. Like the U.S. market, it is best to give the DAX the first 30 minutes from its open to trade to allow it to find a direction. In doing this, the S&P futures have time to readjust from the Asian markets to the European markets.
Finally, we get to the US markets. Though Europe does not close until after the first two hours of our market, we take control of the trend when the US opens. Each section of the world has their own news and economies. Trends will change throughout the night and day as news pours in. Trading at night can try your patience if you are not used to watching a slow market. As the sun moves around the world, more volume and volatility pours into the market making it easier to get in and get out with a profit. As long as all the foreign markets are trading in one direction, the odds of making a good trade greatly increase as the DAX futures open. Follow the S&P and DAX trend, they will keep you on the right side of the market.