Trading US Open Futures Markets based on European Session Volumes and Trends
Trading futures can be a profitable way to invest your money, but it requires a lot of knowledge, skill, and strategy. One strategy that has proven effective is trading US open futures markets based on European session volumes and trends. In this article, we will explore this strategy and how it can help you make profitable trades.
The European session is the most active trading session in the world, with London being the financial hub of Europe. The European session opens at 2:00 AM EST and closes at 11:00 AM EST. During this session, most of the financial news and economic releases are announced, and the markets tend to be very volatile. This volatility can create opportunities for traders who know how to spot them.
One way to identify these opportunities is to use correlation indices. Correlation indices show the relationship between two markets or assets. A correlation of 1 means that two markets move in perfect harmony with each other, while a correlation of -1 means that two markets move in opposite directions. A correlation of 0 means that the two markets have no relationship.
For example, the S&P 500 and the Dow Jones Industrial Average have a high positive correlation. This means that when one market moves up, the other market also moves up. Conversely, the S&P 500 and the US Dollar Index have a high negative correlation. This means that when the US Dollar Index moves up, the S&P 500 moves down.
Inverse Correlation Indices
Another way to identify trading opportunities is to use inverse correlation indices. Inverse correlation indices show the relationship between a market and its “safe haven” asset (A safe haven asset is one which is expected to maintain or increase in value during periods of economic uncertainty and market turbulence. Investors seek safe haven assets in such times in order to limit their exposure to possible market downturns) A safe haven example can be gold or the Japanese yen. More about safe-heaven assets here
For example, the S&P 500 and gold have a negative correlation. This means that when the S&P 500 moves down, gold moves up. This is because gold is often considered a safe haven asset, and investors buy it when they are uncertain about the market’s direction.
European and US Futures Markets
The European and US futures markets are closely related. The European futures markets, such as the German DAX, the French CAC 40, and the British FTSE 100, are often used as indicators for the US futures markets, such as the E-mini S&P 500, the E-mini Nasdaq 100, and the E-mini Dow Jones Industrial Average.
During the European session, the European futures markets tend to be very active. Traders use these markets as indicators for the US futures markets because they often move in the same direction. For example, if the DAX is up, the E-mini S&P 500 will also likely be up.
The Asian session is also an important session for traders to watch. The Asian session opens at 7:00 PM EST and closes at 4:00 AM EST. During this session, the markets tend to be less active, but they can still provide valuable information for traders.
For example, the Nikkei 225, which is the stock market index for the Tokyo Stock Exchange, is often used as an indicator for the US futures markets during the Asian session. If the Nikkei 225 is up, the E-mini S&P 500 will also likely be up.
To trade US open futures markets based on European session volumes and trends, traders should follow a trading plan. Here is a sample trading plan:
- Start by analyzing the previous day’s market performance during the European session, focusing on key market indices, volume levels, and any significant price movements. This analysis will help determine the general trend of the market and identify any potential trading opportunities.
- Monitor any economic releases that are scheduled to be released during the European session. These releases can have a significant impact on the market and provide valuable insight into future price movements. Can see free in real times news here: www.financialjuice.com
- Pay attention to any significant price movements in the Asian session, as they may provide further insight into market sentiment and potential trading opportunities.
- Based on the analysis of the previous steps, identify any assets that are likely to exhibit a safe-haven effect during periods of market volatility. These assets may include gold, the Japanese yen, the Swiss franc and also the VIX or UVXY
- Develop a trading plan that takes into account the analysis conducted during the previous steps. This plan should include the assets to trade, entry and exit points, stop-loss levels, and any relevant risk management strategies.
- Continuously monitor the market during the US open, taking into account any new information that may impact the previously developed trading plan. Adjust the plan accordingly if necessary.
- Review the performance of the trading plan after each trading session, analyzing any successes or failures and identifying potential areas for improvement.
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As mentioned earlier, the European session plays a crucial role in the price action of the US Open futures markets. It is therefore important to track the volumes and trends during this session to identify potential trading opportunities during the US Open.
One key indicator to monitor during the European session is the Euro Stoxx 50 index. This index is made up of the 50 largest companies in the Eurozone and is a good barometer for the overall health of the European economy. When the Euro Stoxx 50 index is rising, it indicates that investors have a positive outlook on the Eurozone and this could translate into a positive sentiment towards the US Open futures markets.
Another important indicator to monitor is the German DAX index. The DAX is a blue-chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The DAX has a strong correlation with the Euro Stoxx 50 index and is therefore a good indicator of the overall health of the European economy.
It is also important to monitor the volumes traded during the European session. Higher volumes usually indicate increased market participation and can often lead to more pronounced price movements. This is especially important during news events such as economic releases or central bank announcements.
The Asian session can also provide valuable information for trading the US Open futures markets. The Nikkei 225 index, which is Japan’s primary stock market index, can often have an impact on the US Open futures markets. This is because Japan is the world’s third-largest economy and its markets can have a significant influence on global markets.
When trading the US Open futures markets, it is also important to consider safe-haven assets such as gold and the US dollar. During times of uncertainty or heightened risk aversion, investors often flock to safe-haven assets which can have an impact on the US Open futures markets.
In conclusion, trading the US Open futures markets requires a thorough understanding of the European and Asian sessions and how they impact the US Open. By monitoring key indicators such as the Euro Stoxx 50 index, the German DAX index, and the Nikkei 225 index, as well as keeping an eye on volumes and safe haven assets, traders can develop a comprehensive trading plan for the US Open futures markets.
Remember that trading is inherently risky, and it is essential to carefully consider your personal risk tolerance and financial situation before entering any trades. Always use proper risk management techniques, such as stop-loss orders, and avoid trading with funds you cannot afford to lose.
This article is meant for educational purposes only and should not be taken as advice on how to invest your capital. Always speak with a professional financial planner or advisor before making any investment decisions.