Emini Futures and Night Trading -- Forget About It


What are Emini Futures and why doesn't night trading work? Emini futures, such as S&P500 (ES), Dow (YM) or the NASDAQ (NQ) are based upon the equity markets. These equity markets work well when the Markets are trading, but afterhours, well, that's a horse of a different color.

The New York Stock Exchange (NYSE), the American Stock Exchange (AMEX) and the NASDAQ have traditionally been based upon floor traders physically joining buyers and sellers. The hours the Markets were opened were a matter of practicality, the 9:30 to 4 p.m.EST. Floor traders simply did not want to work any longer. But investors wanted to trade outside these hours, especially those who worked long hours. So these exchanges extended their hours of trading from 4 a.m. and 9:30 a.m. ET, then again from 5 p.m. to 8 p.m. Most larger brokerages have trade desks ready to handle orders during these times.

But just because you can trade equities outside of market hours doesn't mean you should.

Extended hours trading has basically failed to attract investors because the larger institutions simply do not participate. Volatility falls off dramatically. You don't see as many buyers or sellers waiting to trade your shares. The bid (the price you can buy the shares for) and the ask (the price you can sell the shares for) are wider than during normal trading hours. Selling at night, you could get a lower price; buying at night you could pay more than you needed to. Moreover, since fewer people are trading, price tends to spike up and down as a result of high frequency trading robots.

Because the stock equity markets are not well traded in extended hours, unfortunately this also disables the equity based emini futures contracts as well. The same problems described above for the equity markets affects the emini futures as well. It is advisable to stay away from the equity markets emini futures off hours.

There are a variety of contracts that work well during the extended hours. Gold, crude oil, currency trading, these all do well off hours. But equities...forget about it!

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