The Market day - Imperative Phases

A market day has a lot of interesting periods and within these periods, several events that can form the market. Some of these events happen around the same time each day, these events offer insight for traders, some traders take advantage of them and some avoid them, many of these events are common and also take place in international markets.

In Australia our local share market opens at 10am AEST, and closes at 4 pm, being 360 minutes, with the ASX there are also certain phases before the open and after the close, such as pre open and a closing price auction around 4.10 pm. TradingLounge Analysis stops trading at 4 pm and will have a mark to market to adjust closing prices in line with the closing auction of the market.

Also with TradingLounge Analysis you can trade Sectors and the opening and closing time are slightly different. The cause being the share market has a staggered possibility.

Opening Phase

Opening takes place at 10.00 am AEST time and lasts for about 9 minutes. During this stage securities open in five groups, according to the starting letter of their ASX code and CFDs will open at the same time:

•           Group 1 10.00:00 am +/- 15 secs A-B

•           Group 2 10.02:15 am +/- 15 secs C-F

•           Group 3 10.04:30 am +/- 15 secs G-M

•           Group 4 10.06:45 am +/- 15 secs N-R

•           Group 5 10.09:00 am +/- 15 secs S-Z

Sector Trading

TradingLounge Analysis CFD Sector trading necessitate the whole market to be open before trading starts merely because Sectors have shares ranging from A - Z that perhaps in a Sector. For example in the Finance Sector, CBA will open in the first 2 minutes and WBC will open in the last 9 minutes. The Sectors open at 10.15am and close at 3.45 pm. However always check with a dealer on trading times.

Market Depth

Market orders cannot be placed before the market opens. So many traders make use of detail orders such as the limit order. Limit orders can be placed before market opening - the pre open, and traders use the limit order as a type of market order to move positions in or out on opening. The opening price auction has priority, that is price, then time based. Using a limit order to purchase long positions on the opening, is simply done by putting in the highest price in the market depth and a trader wishing to sell positions on opening would simply place in the lowest price. The opening auction simply calculates all the limit orders in the market depth on the Bid and Ask side and establishes a ‘match price'; this match price becomes the opening price. Even though, say the buyer put in a price, he/she may also be filled at a lower better price, or the matched priced. The same goes for the seller that places a low sell price as a bound order; it can get filled at a better higher charge.

In reality, the opening and closing prices for a protection at the exchange or it is settled by a four step system using conditional pattern. If the application of principle 1 cannot solve the price then application of principle 2 is implemented and so on. Principle 1 is what we have been talking about; it achieves a subset of potential auction prices from the list of overlapping buy and sell orders. Principle 2 is about establishing the minimal surplus; this is how the ASX conduct their pricing not TradingLounge Analysis. However it is important to understand how the pricing process develops, as the balance of the opening price will impact on your trading. TradingLounge Analysis will try to improve your limit order price on opening only in the same manner as the underlying asset is treated. The Market Depth on MarketMaker opens at 10 am

Aussie200

The Aussie200, a future based, opening at 9.50am and closing at 4.30pm, comprises 400 minutes of trading day. By breaking the trading day up into several periods a trader can start to notice and reach particular market actions within these markets in sections. This is more for the day trader or short term traders looking for better prices for a variety of reasons. The main sections are the morning and afternoon sessions with the most activity and volume coming from certain times within these two periods.

Most are aware of the long lunch period which seems to happen in most countries, with some even closing for lunch. This lunch period operates on very low volume, generally speaking. Many day traders, that observe volume and order flow, would trade the volatility and not the low volume lunch period - approximately from 11.30 to 2.30, depending on the interest in the market.

This low volume lunch period divides the day into two distinct sessions, which makes day trading interesting in that the morning session, starting at 9.50 for the Aussie 200, 10 am for the cash market, share CFDs etc, through to 11.30/12 is quite a short time frame, one and a half hours. With the afternoon session generally speaking, the volume starts to flow around 2.30. It can be earlier or later, depending on how much volume came in through the morning session and what's going on in Asia, so the afternoon session on average is between one and half hours to two hours of trading.

So day trading doesn't have to mean looking at the screen all day. In actuality there are lots of tradersdealers that merely play the open and that's it for the day or just afternoon period. Personally speaking I like the last 25 minutes on the Aussie as it runs fast, with the houses that have been hedging or trading for the day lifting their orders off the underlying assets just after 4.05pm. The morning session in London is a great early evening session here from Australia: the UK morning session has the same patterns on opening as our markets while their afternoon session in influenced by the US.

The Aussie200 is futures based and also traded in what is known as the night market, that is, when the Aussie200 closes at 4.30pm it will reopen trading again at 5.10 pm (AEST) and trade through the trading hours of the European and US markets closing again at 8am. This is the same for many futures based indices around the world.

Pre-open and the open at 9.50am

The ASX takes 9 minutes to open full, from 9.50am to 10am. On the Aussie200 in the first 10 minutes from 9.50am to 10am when the cash market opens, the market moves in a range of approximately 10 points on average. It's good to isolate this as a phase to study separately: what can be studied:

•           where is the overall market

•           how far away did it open from the close of the night market

•           how far is it from yesterday's close

•           how many points i.e. null

•           how much volume in the pre open

•           then volume and bar reading come into play

•           how is the balance of bull and bear

•           and, a very common event takes place, some traders call it the squeeze.

We will look at the Aussie 200 and BHP as examples. Let’s say the metal markets are up and the US indices are up reasonably strong, US30 up 150 points, and it looks like our local market is heading up for the day, our Aussie 200 through the night has moved up 20 odd points and the opening at 9.50 am opens around 7 points of the night markets close. In the 1 minute bar chart below, we can see the dotted balance line from the close of the night market. The open is not far from the close and the first 10 minutes or 10 bars travel around 10 points on average. These are points to construct from, they are not set in stone, as the market could just run up or down from the open, or if the market has closed substantial on Friday afternoon and Monday was a strong bull day then Tuesday morning maybe profit taking and choppy on the open and the market maybe going nowhere till the afternoon, because in the real world out of the five trading days two or three will be great and the others choppy and range bound.

The trader needs to view all time frames and choose the moments of volatility. So 10 points in 10 minutes on a bull day. It’s really usual for the market to dive 20 points before moving up for the day. This can be due to traders taking profits: as all the new traders think, ‘because the markets were up in the US they can just buy on the open'; the new traders buying on the opening could be covering the profits of traders covering their longs and or larger traders reading the volume and simply selling on the open taking the longs, and when there are no more traders going long, they sell more, this normally happens 4 to 6 minutes into the opening on a series of testing who's in the market, i.e. null This may be as minimal as 1000 SPI contracts.

In the figure below when the money market opens on the tenth bar the low is taken out and the following bar breaks to the downside fast - this action is normally the computer triggering the long stops, the longs getting squeezed out of the market. It is very much general for the Aussie200 to run approximately 20 odd points, usually covering the gap from the day before of the day market. Then the market will have its run up for the morning session. This squeeze normally finishes between 10.15 and 10.20am.

It is also fundamental to start understanding key numbers, the first fundamental number in the chart below is the close of the night market i.e. the balance line, as it acted as resistance. This in turn became a supply zone, micro and macro key numbers (see tradinglevels), or just be aware of large rounded numbers.