Pre-market / After Hours ES PA....The hidden gem uncovered

W

wiesman02

I haven't found a decent thread dedicated to after hours / pre-market ES trading. So this thread will attempt to provide some insight into it.

For those of you that trade the ES, it astonishes me how many people do not use 24 hour charts. To me, using only RTH charts is somewhat like flying blind in the ES... at least during the morning session. While I'm only 2.5 years into trading the ES fulltime, the majority of those years were spent not giving too much credence to after hours and pre-market trading. Now, having a good way to analyze this action, its 10x easier to trade rth hours.

If this thread gains enough traction, I'd like to outline some ways I use after hours and pre-market action to better trade the market. Ideally, I'd like to give some historical analyzation and real time analyzation.... real time meaning right before market opens so that hopefully this can be somewhat educational and we can have some meaningful ideas shared. As we all know, Monday morning quarterbacks are of no benefit to anyone.

Basically, I use the after hours and pre-market action to provide myself with a somewhat accurate representation of how the trading day will go. For example, will we trend up all day ? trend down ? chop all day ? Have a reversal ? The PA combined with support and resistance levels determines this. Now, everday will NOT be clearcut, and this system certainly doesnt predict a direction the market will go in everyday. But those of you that trade the ES regularly, you know that there's a definite difference in PA when trending days occur, reversal days occur, and plain old choppy days occur. My pre-market and after hours analyzation attempts to uncover when these likely will happen. And just an FYI, sometimes, it takes the first 15 of the trading day to make certain.

In my next post, I'll go over some rules I use in analyzing this action. When I get home (i'm working my evening job right now), I'll post some charts and examples to show you guys exactly what I'm talking about.

Hopefully, this thread will spark some good discussions and maybe even provide me with some more ideas in how I/we could better analyze pre-market and after hours trading to become better prepared for the RTH trading day in the ES.
 
I have noticed some nice trends pre-market but have never tried to trade before the open. Sometimes price after the open follows the pre-market pattern, however, I have never been able to predict the direction of the open based upon the pre-market. I will look forward to your ideas.
 
thanks for this thread looking forward to it.You picked a pretty wild time to start it- don't know if that will help or hinder any analysis...
 
First of all, this thread is NOT intended to help you trade before the open. Its intention is to help you analyze premarket trading so that you can better effectively trade RTH. And its not necessarily going to predict direction. Occasionally it will, but it will likely predict HOW the market trades..... Ups and downs, or straight ups or straight downs.

My rules / observations: These are basic concepts that u need to know.

First, you need to start with your last all day trending day. Since we last had a few all day downtrending days, I will first provide my rules, and then I will give a few examples to show you how you can analyze them.

1) The down trending / or uptrending day is how you determine your support and resistance levels. When a market is trending, it has a few legs during its journey. 3 legs is common. Legs are often referred to as consolidation. This 'consolidation' is your support and or resistance points. These areas will determine whether the market will hit resistance, support, go into a short squeeze, or have a sell off (profit taking after an uptrend).

These levels are going to aid us in our pre-market / after hours analyzation journey. You will be surprised how important they become.

Take note, I use all day downtrending / uptrending days as my basis for support / resistance levels because often theres 1) high volume during these days, and 2) PA usually gives a pretty picture on how accumulation / distribution occurs. You can find smaller support areas inbetween the ones I list, but often they might only be good for a minor scalp. I care more about the accumulation and distribution of price. And a large % of the big $ will be looking at these levels as they are often invested in them.

2) The PA patterns that result immediately after a trending day are often the most reliable patterns.

3) When the after hours / premarket globex makes a higher high than the day before and pushes down this is an indication of weakness. When it makes a lower low and pushes up this is strength ! This is a very simple concept that gets overlooked constantly. While this does not mean the market is going to immediately reverse its course, it does mean the following: if the market does put in this higher high, and pushes down.....then opens somewhere between the day befores range, you can definitely expect weakness that day. So therefore, when that first hint of weakness occurs, you can better capitalize on it b/c it makes more sense to you PA wise.

4) After hours / premarket action is making higher lows (HL's), and higher highs (hh's) (note do no confuse this with higher highs over the day before's action, this is completely different. All i am talking about is price moving up, Hl's, HH's), and EMA's are therefore pushing up, this is a STRONG indication of an up trend day, or at the very least, bullish PA for the morning session. Also, vice versa of this as well. LH's, and LL's, EMA's down.....

5) After hours / premarket action is making HL's and HH's (often times they are messy HL's and HH's), yet the market chops at the open, then sells off during the morning session. A reversal is almost always in the cards. Whether it pushes up all the way to the open, or only gives u a 3 bar push, and fail......if u see some sort of a reversal set up, it should play out. I'm not making myself clear here.... We have HH's, HL's, and price chops at the open, and then sells off. The market will almost never continue straight down all day. We will usually have a reversal setup. IE, the market shows a reversal, and pushes up sometimes back to the open, sometimes a little under, or over....u get my drift...... they key is to better be prepared when a reversal day is in store.


These are the very basic rules. Again, anyone with half a brain knows them. And I'm no genius by pointing them out. But they are necessary for me to show so that I can provide some historical charts and later give some examples of the more complicated scenarios. With basic knowledge, we can build and give harder scenarios that become clearer to you.

So first we go through the basics...... the easy days to analyze. then we move on to the harder days. These days, I will provide more of my rules / observations.


When I get home, I'll post my first example with charts.
 
I don't mean any insult here, but I always find that bits of wisdom are useless. There are already so many levels out there and impressions to have, what are you really supposed to do with it all?

I'll give you an example. I just went ahead and pulled up a chart. I pulled back past the last few days, because they've been crazy.

So take a look at the first days I look at, May 04 to May 05.


Post/ pre market on May 5 made a new low, stayed on that new low, and opened the day on that new low. So what does this mean? Strength? No, it would mean weakness. Market opens and bam, we rally up 11 points.


May 03 to May 04, makes a new low pre markets, opens on the low, and sells off.

Okay, 1 for 1, as accurate as a coin flip so far.

Days before that = pre market stays in the range, market rallies hard to the upside.

Days before that = pre market makes new high, stays on the high, sells off massively.


I would just give one piece of advice guys. Before you spend too much time talking about something, just open up a chart and have a quick look.

It will save you lots of time.
 
Well, we have a naysayer already and his analysis doesn't pertain to a thing I said nor had he read my rules or else he'd have seen that this action fits perfectly with one of my basic rules. But I'll let u off the hook b/c i havent had a chance to post any charts yet.

I'm home now, but exhausted. I started typing a response and a chart, but I'll save it for tomorrow.

First I'd like to use a day previous to the one the above poster talked about. Then, once you see the way I analyze it, you will see how this day you talked about (May 5) fits into my setup. I'll address the May 5 day when I wake up in the AM. B/c I'm exhausted.

But I will point out a basic introduction to how I look at things here in the morning.
 
Quote from wiesman02:

Well, we have a naysayer already and his analysis doesn't pertain to a thing I said nor had he read my rules or else he'd have seen that this action fits perfectly with one of my basic rules. But I'll let u off the hook b/c i havent had a chance to post any charts yet.

I'm home now, but exhausted. I started typing a response and a chart, but I'll save it for tomorrow.

First I'd like to use a day previous to the one the above poster talked about. Then, once you see the way I analyze it, you will see how this day you talked about (May 5) fits into my setup. I'll address the May 5 day when I wake up in the AM. B/c I'm exhausted.

But I will point out a basic introduction to how I look at things here in the morning.
More...

I am interested in hearing what you have to say, one of the more profitable trading systems I developed trades overnight. Chart examples would help a lot since you are trying to draw a picture with your words...
 
I'm not trying to be a naysayer, just trying to throw some common sense into the picture.


But if the analysis is so complicated, that it takes pages and pages to talk about and numerous charts, then just off the top I gotta say it probably works in hind sight, but is useless in real life.


That's just my opinion, and I hope I'm proven wrong. Again, I'm not trying to bash your idea.
 
Weisman, thanks for starting this thread. I use 24-hour charts and I've been trying to decipher relationships between pre-market action and action off the open, but haven't been trying too hard. This thread will get me going. I am planning to start trading more in pre-market. I especially like CL (oil) pre-market action, much smoother and calmer than RTH, but it seems ES has very nice moves in pre-market as well.
 
May 5th, series of lower highs and lower lows up into the market open. The market open is near the bottom there, you can see that blue volume spike peaking up.


It also stayed with in the previous day's range, like you noted.

I did read your post.


So pre market make a series of lower highs, and lower lows, stays within the previous day's range, and this is supposed to be a sign of weakness? The market rallied extremely hard.
 

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