Well, what a day. After a “complex correction” on Thursday and Friday, we get a continuation of the down move today. Rally in US Dollar and Bonds too – so a flight to safety. Still think the low of this move is not in – and it’s fun, fun, fun all the way.
Question of the day …
Good question from Jason H.
“I work from 8 am – 5 pm North American Eastern Standard time. So, I was wondering what your thoughts are regarding trading FX futures and the Emini. My dilemma is trying to make sure I’m trading the times when the instrument is the most volatile and has volume. I was planning on trading the Emini early in the morning from 4 am to 6 am Eastern or possibly trading FX in the evening.”
Volatility and volume and definitely the most important criteria – whipsaw trades and slippage will kill you otherwise. In picking a market I talk about the need for “Volatility, Liquidity and Electricity” – the first 2 are self-evident. “Electricity” refers to trading electronic markets, rather than pit traded ones.
There are essentially 3 trading time zones. We open the trading day with the Asian session, then move onto the European session and finally the US session. Of these 3 though, the US session is by far the most important – it sets the trend, tone, pace, everything.
In each time zone there are equity futures and forex markets that are the deepest and have decent volatility. In the European time zone it’s the Dax futures and Euro/US Dollar forex pair. In the Asian time zone it’s the Nikkei 225 and Australian Dollar/US Dollar forex pair. (Note: The Japanese Yen/US Dollar forex pair is larger but both are “carry trade” currencies are so don’t move against each other as much as the Aussie.)
So to answer Jason’s question. His 4 am is the start of the European session – so I’d suggest trading the Dax or Euro then. His 8 – 9 pm is the start of the Asian session – so I’d suggest trading the Nikkei or Aussie then.
The signals will be better the deeper the market. You could trade the Emini during the European session and it will track the Dax quite well. However, the signals will not be as clear on the Emini chart because it’s mostly small volume and possibly manipulated by the Professionals. Better to chart the Dax and trade the Dax directly.
Charts and brokers are another issue altogether.
And here’s a video with some more current thoughts on the best markets to trade if you can’t trade the US time zone.
Link of the day …
Frustrating I know – it’s just all too hard. Meanwhile the statute of limitations clock is running down. I can’t see how we’ll ever see people brought to account.
And poor old Elliott Spitzer – he was definitely brought down by his enemies (probably Wall Street). If it had happened in France or Italy, no one would have cared whom he was sleeping with.
Quote of the day …
From Page W.
“Just want to thank you for your indicators and videos. I just completed my first week live. I ended the week in profit, just 1 losing day. The videos are outstanding, a couple of my trades were identical to yours, so I am confident that I am reading things the way you do.”
From Alex D.
“Your analysis and education over the past few weeks has been 5 star, you are doing great work and helping loads of people, you have helped me enormously, I thank you deeply. You definitely have the best trading site on the web by far. And the indicators are light years ahead of anything else I could find, once one knows how to interpret them they are very reliable, awesome job.”