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Frank

Quantifying Pit Vs 'Overnight' Range

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I took a look at quantifying the theory that all the 'action' is occuring on Globex and not during regular pit session hours. Here is a first pass attempt.

 

The futures market is generally open ~23 hours a day. The S&P Cash Index is open for 6.5 hours of the day. Then there is the 15-min stub period from the cash close to the futures close.

 

The European market is the 2nd most active market in the world and this is where I want to focus first. It starts to get complex because world clocks are not aligned -- time changes seasonally -- creating diff't amounts of overlapping sessions.

 

Some assumptions have to be made or else this becomes a major 'get lost in trees' exercise.

 

So here is my assumption: only compare the 6.5 hours of US cash index (9:30am to 4pm NY time) to the 6.5 hours prior to the cash/futures index open (3am to 9:30am NY time). The 'amount of time' in these two time periods is the same and therefore we will not be comparing a 6.5 hour period to a ~17 hour period of time -- as you would if you just did 'pit' vs 'globex'.

 

Here is the chart result, shown as a 20-day rolling moving average of the ratio of pit range vs 'euro session' range. The Red Line is the average for that year. Year to date, pit has represented 63.2% of the overall '13 hour period' measured.

 

attachment.php?attachmentid=14541&stc=1&d=1256490906

 

 

note to James (TL Founder): could you start a 'Market Statistics' Forum?? --- unless that is what 'Futures Laboratory' is meant for.....

5aa70f445b724_PitvsEuroSessionRangeSince2002.thumb.png.bf07004a5e7ce7f27522522d1e8143e9.png

Edited by Frank

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If you miss Asia you are missing a lot. Often I see a nice move in Asia after the US and the European market will open with adjustment for the US+Asian move since its previous close.

 

Having spent 5 years trading asia I think you probably won't find much useful unless you build a theory of what you are looking for before you run tests. Otherwise its probably crude data mining and may generate correlation based theories that have little predictive value because you missed the causation.

 

One observation is that there have been periods where there are big moves in US time. When that occurs the Asia time move is often a big gap followed by choppy consolidation. So is this true or is my memory just biased by the effect on my trading of those days where it was true? Bias and distortion being the wonderful things that they are, damn it.

 

Also consider this one. You guys have those morning news reports. These cause currency markets to react in shock and they ring and create non-trending behavior. I've not watched your equities but the currencies trend nicely from London open to US reports (with 30-60 minutes of prepositioning behavior before big reports) then ring like a bell when the report comes out.

 

Edit: Last idea. Rather then just looking at one period vs another or taking the paranoid delusion hypothesis that the big boys all moved the market at the same time during the early hours (I laughed out loud at that ... some people see ghosts in the machine) you might look at correlations between ES and HSI/Shanghai for Asian time and ES and ESTX50 the European time.

Edited by Kiwi

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hi Kiwi,

 

I haven't presented any data on Asia yet -- this was just europe vs US. Yes, in a market that trades 23 hours a day, moves are going to happen outside of precisely 9:30 - 4pm NY time.

 

Let me give an example of how I am calculating this -- I should have done this in the first post, I realize.

 

On Friday (Oct 23, 2009): the 9:30am - 4pm EST (pit session) low and high was 1071.50 to 1093.00 -- for a range of 21.50 pts during that 6.5 hour time period. If I look at the range from 3am to 9:30am EST, the high was 1095.25 and the low was 1089.25, so the range was 6 pts during that particular 6.5 hour period of time.

 

If I think of 1 'session' as 6.5 hours and I sat at my computer for those 13 hours (2 'sessions') --- there was ~27.50 pts to make a few trades over that combined 13 hour period. In this situation, the US session was the one where most of the range occured --- with US hours representing 78% of the combined 2 session today (21.50 / (21.50+6.00)) = 78%. The chart was just a way to view what has happened over the last 7.5 years from this perspective.

 

This isn't data mining with an agenda -- this is just observing 2 equal periods of time and doing subtraction and division. If you want to cut it another way -- let me know the 'rules' you would like to use and I may try it out.

 

(In this calculation, I am just trying to show that if you sat at your computer for 6.5 hours -- and you chose those hours to be 9:30-4pm EST -- how much range did you see? and using 'range' as a proxy for 'opportunity'... I can slice and dice this data in many other ways that are certainly better -- this is just one way to do it).

 

frank

Edited by Frank

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I took a look at quantifying the theory that all the 'action' is occuring on Globex and not during regular pit session hours. Here is a first pass attempt.

 

The futures market is generally open ~23 hours a day. The S&P Cash Index is open for 6.5 hours of the day. Then there is the 15-min stub period from the cash close to the futures close.

 

The European market is the 2nd most active market in the world and this is where I want to focus first. It starts to get complex because world clocks are not aligned -- time changes seasonally -- creating diff't amounts of overlapping sessions.

 

Some assumptions have to be made or else this becomes a major 'get lost in trees' exercise.

 

So here is my assumption: only compare the 6.5 hours of US cash index (9:30am to 4pm NY time) to the 6.5 hours prior to the cash/futures index open (3am to 9:30am NY time). The 'amount of time' in these two time periods is the same and therefore we will not be comparing a 6.5 hour period to a ~17 hour period of time -- as you would if you just did 'pit' vs 'globex'.

 

Here is the chart result, shown as a 20-day rolling moving average of the ratio of pit range vs 'euro session' range. The Red Line is the average for that year. Year to date, pit has represented 63.2% of the overall '13 hour period' measured.

 

attachment.php?attachmentid=14541&stc=1&d=1256490906

 

 

note to James (TL Founder): could you start a 'Market Statistics' Forum?? --- unless that is what 'Futures Laboratory' is meant for.....

 

Hi Frank, interesting suggestion. Ive added this temporarily under the Welcome to Traders Laboratory category titled "Market Statistics". Ill be doing rearranging categories this week so may move this in a different category block. Thanks.

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Interesting to note a steady trend towards the European session. I guess there could be many reasons for this including the rapid growth in trading throughout greater Asia in recent years.

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