How much weight do you put on overnight price action?

I've heard overnight prices can show where the important levels are and I've heard that overnight volume is nowhere near day session and shouldn't be considered. Right now, my understanding is for swing trading, overnight volume is not important for stocks (provided no significant overnight catalyst) and futures. However they can provide clues for intraday traders or swing traders looking for good entry or references for managing trades. Curious to get other views on this.

One thing for sure is low volume means easy to manipulate. Very often, I've noticed a certain pre market trend only to see it reverse completely after open. Like the gap and crap, or shake out the longs.

 

For what I do as a day trader. Not much. 90 + % of what I look at is derived from RTH.

But I know a very profitable day trader who does not seem to make a distinction between RTH/ETH and simply trades from continuous charts.

 

I generally see after hours if the next day is going to be a huge down day as you can see the selling picking up, other than those big days, not much as other news occurs and pulls it in different directions, so it's only big news after market that carries over through the next day.

 

Firstly, don't blame the manipulators.
Don't be afraid of the manipulators.
If there are manipulators, be thankful to them.
Because they provide trading opportunities.

Now to answer your question.

It depends.

Sometimes, I cover the overnight session charts totally.

Sometimes, I put some weight on overnight session charts especially when
the trend started during Asian / European session.

 

Overnight action was once unimportant (except for occasional shock news) but that started changing 5-7 years ago. Check out SPX in 2012 vs late 2013, the latter looks like Swiss cheese with little gaps everywhere. Some of the biggest moves in ags this year were launched overnight. Most likely this is due to the rise of China.

 

I don't know if you have ever seen this chart. However, there is a huge difference in outcomes

 

This may prove that what the OP wrote won’t work. If a stock goes up overnight then how would you use this info to trade during the day?

 

One needs to be more specific. It depends upon the instrument. How much action, how regular the action. E.g. some US stock versus ES futures will have a lot of difference because ES is traded world wide. Look back and see how much volume there is AH. A small player can move a thin volume.

 

I use the open interest of options and futures and give the market some room to move.

 

The question, I believe, wasn't if the overnight session yielded greater returns or anything to that effect. The question was if the overnight session have information which is useful to trade the RTH session and/or how much weight should be put on that.