I wanted to discuss my observations of what I witness on the DOM when I trade FESX and ES right at the open for both products. I was hoping someone else with more experience could tell me whether my interpretation of this type of price action represents an actionable edge, or whether I am seeing a false pattern within the noise.
By the way, I treat the 2nd hour of FESX as the open just because thatâs when the cash market opens and there is so much more volume.
Here is an example of what I see:
The market opens, you see a flood of orders hit the bids and offers and the market goes up and down a couple of ticks and oscillates within this 3-5 tick range. However, the offers start getting lifted, the market approaches this intraday high, huge volume hits the bid and . . . it holds. At this point, I am thinking if the buyers start hitting the offer and it pulls, this thing is going to go.
Conversely, if the market started ticking down to the intraday low, and you see buyers hit the offer but it doesnât budge, I am thinking if the sellers hit the bid hard and the bids pull, this thing will sell off.
I have always read âdonât trade the open, it is noise,â or âwait for the opening range to develop,â but traders/robots trading in this environment donât just make arbitrary decisions, no one is careless in this profession. Every tick has a reason or purpose behind it and this canât just be noise.
Going back to the first example, I am assuming youâve got 2 institutions just battling it out, one guy is sitting on the offer, the other guy absorbing everything on the bid and whoever wins, the loser is going to cover and send the market rocketing into the opposite direction.
Itâs hard to see this type of price action in the afternoon or late morning because there is less volume and the market is too thin. I see someone (or a bunch of people) hit the bid in the ES for 300 contracts and he/they clear out 3 prices. I am assuming the bids underneath pulled, but this is crazy. That type of nonsense makes me reluctant to trade in the afternoon. I canât take profits on a winner and I canât get out of a loser when it is that thin.
I actually believe the first 30 minutes might offer more opportunity than the rest of the day.
I simply wanted to know if others trade this time frame with any degree of success and whether reading the order flow in this fashion is an edge.
Thanks.
Obviously, I am going to forward test and trade what I see and discover for myself if I have an edge but I wanted to pick the brains of others on this forum.
By the way, I treat the 2nd hour of FESX as the open just because thatâs when the cash market opens and there is so much more volume.
Here is an example of what I see:
The market opens, you see a flood of orders hit the bids and offers and the market goes up and down a couple of ticks and oscillates within this 3-5 tick range. However, the offers start getting lifted, the market approaches this intraday high, huge volume hits the bid and . . . it holds. At this point, I am thinking if the buyers start hitting the offer and it pulls, this thing is going to go.
Conversely, if the market started ticking down to the intraday low, and you see buyers hit the offer but it doesnât budge, I am thinking if the sellers hit the bid hard and the bids pull, this thing will sell off.
I have always read âdonât trade the open, it is noise,â or âwait for the opening range to develop,â but traders/robots trading in this environment donât just make arbitrary decisions, no one is careless in this profession. Every tick has a reason or purpose behind it and this canât just be noise.
Going back to the first example, I am assuming youâve got 2 institutions just battling it out, one guy is sitting on the offer, the other guy absorbing everything on the bid and whoever wins, the loser is going to cover and send the market rocketing into the opposite direction.
Itâs hard to see this type of price action in the afternoon or late morning because there is less volume and the market is too thin. I see someone (or a bunch of people) hit the bid in the ES for 300 contracts and he/they clear out 3 prices. I am assuming the bids underneath pulled, but this is crazy. That type of nonsense makes me reluctant to trade in the afternoon. I canât take profits on a winner and I canât get out of a loser when it is that thin.
I actually believe the first 30 minutes might offer more opportunity than the rest of the day.
I simply wanted to know if others trade this time frame with any degree of success and whether reading the order flow in this fashion is an edge.
Thanks.
Obviously, I am going to forward test and trade what I see and discover for myself if I have an edge but I wanted to pick the brains of others on this forum.
