Our Favorite Futures Trading Levels

Futures trading is a global endeavor, from the time the markets open at 6PM EST on Sunday through to the close at 5PM EST on Friday.  There is a short 1 hour and 15 minutes break in between sessions, but for the most part the hours are straight through the entire week.

Because futures trading is entirely different from trading stocks, there are different levels you must also observe to be able to gauge market sentiment and to anticipate market reversals and momentum.  How can you find these levels?

Good news – we have the answer for you.

But before we being, let’s define the two main trading sessions.

 

The Two Futures Trading Sessions

The trading day is split into two sessions:

  1. Between 6PM and 9:30AM EST- this is known as many different things: the electronic session, the overnight session, the European session, the GLOBEX session.  Call it what you want, they are all interchangeable.
  2. Between 9:30AM EST and 4:30 PM EST – this is know as the US trading session.

Now that you know the two main sessions, we can reveal our favorite futures trading levels and how we use them in our own account.

 

Our Favorite Futures Trading Levels – GLOBEX / Overnight Levels

The overnight session in futures trading is mainly led by Asian and European markets.  It is important to know if buyers or sellers dominated the session, and to know where they won the battles and where they lost them.

We like to follow these levels in the overnight session:

Overnight High – this levels marks the highest point in the overnight session, and represents the resistance that buyers must get through to stop out the short sellers and push the trend higher.  We talk about this concept in our article on trapped traders, click here to read it.

Overnight Low – this level marks the lowest point and represents where longs accumulated to defend the level as support.

Overnight Volume – while this is not necessarily a “level”, it is very important to know how many contracts have traded in the product, so you can compare it to other sessions and see if interest is heavy or light.

You can easily plot these levels on most platforms manually, and some will even allow you to automatically highlight these levels.  We use CQG Integrated Client through Market Delta, and we have coded an indicator to help us plot these automatically.  If you subscribe as a member, you can gain access to this indicator as well as many other resources.  Check out our membership options here.

 

Our Favorite Futures Trading Levels – Previous US Session2

The US session is where the majority of the volume occurs on most futures contracts, including indices and energy.

We like to follow these levels on the US session:

Previous US Session High – this is the high price of the last US session trading day, not the current one.  This helps indicate where we can expect to find resistance.  If we are long below, we would target the previous high for an initial profit target. From there we can let a runner go with a trailing stop to maximize returns.

Previous US Session Low – this level is identical to the one above, but only the opposite.  The low was formed by sellers capitulating and getting stuck, before momentum shifted to run out their stops.

Previous US Session Close – this level represents where the day’s trading settled.  It is an important level because it shows us where the battle ended, and shows us clearly who won – the buyers or the sellers.  How?  Compare the close to the open, and look for volume.  If the close is higher than the open on strong volume, it’s a bullish session.

When you observe these levels closely over the course of a few weeks, you’ll start to notice the predictive power of spotting trends and reversals.

Our Favorite Futures Trading Levels – Putting it All Together

Now that you know which futures trading levels are important to plot on your charting software, we can spend some time discussing how to use them.

Here is how I build my bias every morning.

  1. If the US session opens above the previous US close, we are likely to re-test the close if it is near by before making a run higher to test the overnight high.  Above the overnight high, we have buy stops planted from European traders waiting to be hit.
  2. If the US session opens below the previous US close, we are likely to re-test the close if it is near by before dropping lower to test the overnight low.  Below the overnight low, we have sell stops from Globex traders waiting to be hit.

This is obviously an over simplified way to trade, but it is used for illustration purposes.  The actual process I use to analyze and trade the open has more analysis and variables.

Each and everything morning I show our subscribers the process, the levels to watch for and “trading zones” which present the next best trade for the day.

Join today and try a free trial to experience the power of using professional futures trading levels.  Check out our package options by clicking here.

Now that you have this powerful tool in your back pocket, I’m sure you will start to spot new trends and reversals with more precision and accuracy.

Good luck and good trading to you TRADEPRO!

 

You can also learn about our institutional grade day trading package here, or learn to trade a more passive options strategy in our package here.

The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.