Just getting started in holding positions overnight. I took half off in the ES yesterday at the close and had the intent of closing the other half this morning. I set my overnight stop last night to 11.50, right behind some market structure. I woke up this morning and the market had a huge reversal and blew right through my stop. So my question is this for those who hold ES positions overnight - was I right in putting my stop behind market structure, or should I not be using a stop in the overnight session at all? I just want to know whether my stop being run was a "reshuffling of the deck / wrong the market" type of situation or a "large reversals are common in the overnight / stops only hurt you" type of situation? Thanks ahead of time for your help!
The overnight is a brand new session for equities in both the Asian and London sessions. Different participants and different agendas. The people who created the structures you speak of aren't around to defend it once their trading times end and the new participants come in.
http://www.investopedia.com/terms/w/weakhands.asp INVESTOPEDIA EXPLAINS 'Weak Hands' 1. Futures contract holders with weak hands are generally considered to be small speculators without the financial resources associated with the delivery and storage. 2. For example, retail traders with weak hands would place a stop at the bottom of a double bottom or at the top of a double top and once the pattern is broken, they would automatically be stopped out.
I've had a chance to think about this issue and here is my action plan moving forward - I'm going to analyze the overnight range broken down by volatility (VIX < 20; VIX b/t 20-35; VIX over 35) and will determine the standard deviation of overnight ranges. I'm not sure where the cutoff should be, but I'll set my overnight stops at some SD threshold of the range. I'll also try to locate it behind some market structure. That will be my stop and if the market hits my stop, then so be it - I now have important new information about the market.