Why should someone trade premarket hours ?
A couple of years back premarket volume was very thin, reaching about 40K contracts for ES, and volatility was small, with ES Globex range very seldom reaching the double digit level. Things have changed a lot since.
It's very usual now to see well above the 200K contracts and double digit Globex range for ES premarket. At the same time we see many successful trades produced by GemsBot during the small hours of the day. In practise nowadays trading ES premarket is a much smoother and more predictable session than the regular hours.
Particularly starting around 02:00 Eastern Time when the European Futures markets open and around 03:00 Eastern Time when the cash Markets open in Europe we start seeing enough movements in ES to justify trading it. GemsBot starts running an hour earlier, at 01:00 Eastern Time.
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Why is the premarket video different from the regular hours one ?
The Market Strength which is the backbone of GemsBot is changing in a smooth and gradual way for ES during premarket hours, under normal circumstances, seldom reaching high numbers with four digits.
So in the premarket video the Trend trade is triggered when the Market Strength value crosses the +5 or -5 level, while in regular hours spreadsheet it is the -25 and +25 crossovers that trigger the Trend trade.
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Are all instruments tradeable premarket ?
No. While the ES volume and market depth is of a more than acceptable level, with enough orders at each tick level to avoid large slippage, the other instruments do not have these qualities with the spread between bid and ask being frequently far more than one tick.
So premarket trading should focused exclusively on ES, as most world players are already doing these hours of the day. As an indication, the most popular instrument trading these hours had been FDAX, the German main index future. Nowadays the volume of ES is surpassing that of FDAX and the smoother fluctuations that we observe with ES make trading it with GemsBot as simple as trading can be.
It is also the best way for anyone starting to use GemsBot to see it in action and to understand the basics while making money at the same time.
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Are all types of trades tradeable premarket ?
GemsBot is continuously producing two cluster of trades the Main and the Continuation ones. Premarket though only the Trend and Fast trades are the ones that you should concentrate on. The Sync is of little importance since it involves the other 3 instruments that are not tradeable. Experienced traders of course should not hesitate to take the Continuation trades as well during premarket hours.
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Should the same trade management be used premarket as regular hours ?
Definitely not. Generally speaking the premarket volatility of the markets is more subdued than the regular hours. It is therefore essential this to be reflected in the trade management, where stop loss values are closer to entries and profit taking is sooner than what is used during regular hours.
Due to the different nature of the markets in the small hours of the day, it is advisable for traders whose exposure to the market is usually more than 1 ES contract at a time, to insert half the contracts at the limit price indicated in the spreadsheet, which by design is away from the current bid or ask. The other half should be inserted at the current bid or ask so that it gets filled.
Trading just one contract at a time premarket, it is wise to enter it at the prevailing bid or ask the moment that a Trend Trade is triggered and to exit with either trade management or system rules.
A rough guideline for trading premarket ES, on the basis of 3 contracts at a time, is to use stop loss around 6 ticks, with part profit taking 1st contract for 3 ticks, the 2nd contract for 6 ticks and the 3rd contract to be left as a runner and to be exited according to the system rules.
An interesting experience premarket is that since the market moves at a slow pace, when 3 ticks profit are taken and re entering at the original price level may result in a number of profitable trades of 3 ticks each within the same trend period.
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Should I move or remove my limit order entry if not filled soon ?
There is no need move an entry and to chase the market, since GemsBot produces a large number of trades and there are many opportunities to trade successfully. When the market moves 2 or more ES points away from out limit order entry price, if it is not filled, removing the order is wise since a large pullback may soon result in a change of trend.
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What about trading during scheduled news releases ?
When market moving news is about to be released, the volume of the orders is substantially reduced, since the high volatility that is associated with them requires huge stop loss values in order to stay in a trade successfully and avoid slippage.
So although GemsBot continues to produce trades uninterrupted, and more frequently than not the trend that it shows just before the news release is the one that prevails when the dust settles down, it is wise to be flat at least 3 minutes before and not to open a position until 3 minutes after the news.
There is a link to Econoday in the links page of the site, the leading company that states and classifies the importance of all scheduled news releases.
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Are there certain hours that premarket trades are more successful ?
Yes there are. Of all the trades produced by GemsBot premarket the ones that are close to the European open of the futures and cash Markets are the ones showing an above average rate of success. They are seldom the greatest premarket trades of the day, but the vast majority of them produce at least 1 ES point.
So taking all Trend Trades triggered between 01:50 ET to 02:10 ET and between 02:50 ET and 03:10 ET is ideal for traders who do not have the time to trade all hours, ensuring substantial profits on a weekly basis.
If I personally was forced to trade just one trade each day, I would pick the first ES Trend trade that is triggered after 03:00 ET. It has been measured to produce excellent results every week.
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