Ending the Day Strong

[TopstepTrader 10]

There is a pattern that is very typical in the equity futures markets. I don't know if also holds true in other futures markets -- you will have to figure that one out for yourself. Please note the following charts for Monday, Tuesday, and Wednesday of last week.

 

Note what is in common with all three charts of the S&P mini's:

 

1) They started out strong at the Open, and

2) They had a pullback at about the same time each day

 

 

 

 

However, there is one other important distinction to make about these charts. After the mid-day pull-back, all three charts show the S&P mini's end strong with the close being very close to the highest price of the day.

 

There is good reason behind this. What is going on is that brokers are ranked and given more business based on what price they buy at relative to the Close. In other words, if a broker's average price he bought throughout the day was 145500 on October 17, then it hurts his reputation and his business if the market closes below that price. So what does a broker do to prevent that from happening? He will hold on to some of buying until near the Close to make sure he can push up prices right up to the Close. That will make him look good to his clients. (I couldn't tell you which book I read all this in.....)

 

So when you see a strong bull market at the Open, wait for the mid-day pullback to play itself out, and watch for the first sign of buying afterwards. You will generally want to buy and hold until just a few minutes before the Close. It has a high percentage of being a profitable trade. This is just one of many patterns that repeat over and over that can be exploited for a nice trade.

 

PS. This pattern holds true in the stock market also.

 

Many Profitable Returns,

 

Trader Gregg

 

Mr. Killpack has been studying the markets since 1988. He has read over 40,000 pages about trading and investing strategies, fundamental and technical analysis, and related topics. He began day trading in 2001.

[TheNegotiator 13]

Brokers aside, if the market shows strength from open, there will be a good number of traders who don't get on the train and are waiting for a pullback. Often, this isn't possible for a while. But eventually, as the market gets more and more loaded in one direction, the likelihood is that the market needs to correct a little in order to find additional activity - the guys who missed the train to begin with and those who see that nothing has changed and therefore the correction offers new value.