A few years ago I wrote a technical article for CTA Intelligence Magazine entitled – Where Has The Open Gone? Sounds crazy, but since the introduction of 24hr markets, has the significance of the open altered for systems such as Momentum (Volatility) off the Open? Can you still make money off it? I subsequently did a follow-up video on the subject which is up on our site. I was chatting with one of our clients last week and I thought back to this insight and thought I would share. For any CTA’s interested, here is a link to the original article.
The Weakness of Standard Daily Data
What has the open at 1700h on a Sunday got anything whatsoever to do with what’s going on at the start of play at 0720h on a Monday morning? If you are looking at standard daily bars to make your trading decisions and you are trading a system that relies on significance around the open, then you may have a serious problem.
Some people do not realise that the open reported on standard daily data comes from the open of the PRIOR session. Great if you understand this and its not a factor in your trading. But what if you don’t know? Do you understand that the reported open for an all sessions currency on the CME on a Monday morning is from the open of the prior day at 1700h Sunday. If you are considering a trade based on an open perceived to be Monday morning without realising, then that may indeed constitute a one-way ticket to the poor house.
Always take care when analysing data. After all, if you were investing money with a new fund, wouldn’t you want to carry out just a little due diligence?
Where Has the Open Gone, the article and the follow-up video at least provide some insight and quantifiable evidence of traders mentality around the open of markets for futures and commodity traders exploring new system methods.