In today’s post, we are going to share with you a futures day trading strategy that we use here at TRADEPRO AcademyTM, which has stood the test of time and continues to produce high-quality trading opportunities on a daily basis.
This strategy revolves around trading the US market open and it can be applied to any futures markets including the Dow, SP500 E-mini’s, Crude Oil, and many others!
The core concepts of this strategy are relatively straightforward and make for a strong foundation that you can then test and build off of in order to really make it your own.
Let’s get started!
Why is the US market open so important?
Professional traders are aware of the fact that there are certain times throughout the 24-hour trading session that provide for higher volatility and the US market open is one such example.
When the US markets open at 9:30 am Eastern time, there are a variety of dynamics at play that often provide for early volatility and as a result, great opportunities to make some money!
To better understand why this is the case, it’s important first to know who is participating in the markets around this timeframe.
Leading up to the US market open, the main market participants include traders that trade the Asian session and the London open sessions.
These traders finish their trading day around 11:30 am Eastern time (when their local markets close down for the day) and as a result, any open positions that they carry from the Globex session will need to be closed out as their trading day winds down – this provides for some liquidity around the open.
In addition to this, you’ve also got traders based out of North America that are sitting down at their trading stations to start their day and opening new positions which only adds to the liquidity from the Globex traders and is really the perfect formula for an initial burst of volatility on the US Open and this is exactly what we are looking to take advantage of!
If you want to learn more about the best hours to trade your favorite futures markets, make sure to check out this article here.
Context Matters
If you watch the US market open for any amount of time, you will notice that there is usually an initial burst of volatility that lasts around the first 5 minutes after open as this is when new market orders are hitting the book and trading amongst each other.
While you might see this movement and want to be a part of the action – understand that the direction of the initial morning move is really anybody’s guess.
As professional traders, our focus is on taking trades where the probabilities are in our favor so instead of jumping in on the initial move (the impulse), we prefer to wait for the correction to trap wrong-footed traders in order to jump in for a low-risk continuation trade!
This is where context becomes very important!
In bullish market conditions, the market will often open weak and close strong on the session, whereas, in bearish market conditions, the market will open strong and close weak on the session.
To this point, the opening print (price level) serves as a gauge for where traders could potentially be on the wrong side of the market should the market trade back above or below the opening price after making the initial impulse move.
The Strategy
Bullish Setup
- Identify key session flip zones using market structure from the Globex session
- Plot the opening price level on your charts
- Wait for a bearish impulse move off of the open
- Wait for the market to trade and close back above the opening price level with some conviction (wide range bars with volume supporting the breakout)
- Use order flow to confirm buyers came in to support the move above the open (buy imbalances and volume nodes moving higher)
- Look for a retest back into the open for an opportunity to get long for a continuation move higher
Case Study – Long Example
In the above example, we can see that the market sold off on the US open but failed to break below the flip zone we identified before catching a strong bid that pushed the market back above the opening price with some conviction.
There was a big volume that accompanied this move which suggested that traders that sold below the open were caught wrong-footed and would be fuelling the rally higher above the open as they were looking to buy back their positions to cover their losses.
From an order flow perspective, we can see that there were some aggressive sellers below the open and that once the bearish impulse move lost steam around the $3650 level, buying demand started to enter the market.
The move back above the open was strong and you can see that buy imbalances were creeping higher on this move suggesting the buyers were back in control of this market.
Right around the opening price, we can see there was an HVN (high volume node), as well as a nice buy imbalance that could offer a nice low-risk buying opportunity if the market rotated back into this area.
The market provided two opportunities to jump into the long at the opportunity zone before the buyers pushed the market several points higher offering a profit potential of at least 5 points per contract ($250/contract).
Bearish Setup
- Identify key session flip zones using market structure from the Globex session
- Plot the opening price level on your charts
- Wait for a bullish impulse move off of the open
- Wait for the market to trade and close back below the opening price level with some conviction (wide range bars with volume supporting the breakout)
- Use order flow to confirm sellers came in to support the move back below the open (sell imbalances and volume nodes moving lower)
- Look for a retest back into the open for an opportunity to get short for a continuation move lower
Case Study – Short Example
In the above example, we can see that the market caught a strong bid off of the US open but failed to sustain a breakout above the flip zone we identified before selling supply entered the market and sellers pushed the market back below the open.
There was a big volume that accompanied this move lower which suggested that traders that bought above the open were caught wrong-footed and would be fuelling the move back below the open as they were looking to sell their positions in order to cover their losses.
From an order flow perspective, we can see that there were some aggressive buyers above the open and that once the bullish impulse move lost steam around the $3715 level, selling supply started to enter the market.
The move back below the open was strong and you can see that sell imbalances were creeping lower on this move suggesting the sellers were back in control of this market.
Right around the opening price, we can see there was an HVN (high volume node), as well as several sell imbalances that could offer a nice low-risk selling opportunity if the market rotated back into this area.
The market provided several opportunities on the retest of the opening price to jump into the short at the opportunity zone before the sellers pushed the market several points lower offering a profit potential of at least 4 points per contract ($200/contract).
For more information on how to trade the US open like a professional trader, check out this YouTube video we put together for you all:
Final Thoughts
If you’ve made it this far, then you now have in your arsenal an extremely powerful strategy that we encourage you to practice in simulation mode and really iron out the nuances to make it your own!
As with any day trading strategy, nothing works 100% of the time so it is important to follow a strict risk management plan in order to survive the losses and extract as much profit from your winning trades as possible!
Join us at TRADEPRO AcademyTM to learn how we take advantage of this strategy each morning during the US market open. There has never been a better time to make the investment in yourself!
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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 for your own financial situation. TRADEPRO AcademyTM is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.
