Is it generally a bad idea to do trades in stock index futures when the stock market is closed? When stock market is closed, there is no reference point for the stock index futures. So, is it best practice to avoid trading stock index futures when stock market is closed?
Keep digging! Beside your chart indicators there are many other reference points you can use to predict the index futures direction.
Based upon data viewpoints..... volatility is highest after hours but it usually mean reverts to prior close. I've personally had a portfolio that bet on the mean reversion, although it offers yield over the mean it does present risk that I cannot afford. Hey if you find something I didn't see, you're smarter than me.
The world trades almost 24 hrs... and the index futures reflect much of what's going on world wide... some more than others. Although they trade very thin after hrs.
Based on the replies, it seems there's no hard-and-fast rule that trading index futures outside stock market hours is a bad idea.
Watch major foreign markets. Eg) if trading dow futures, watch Chinas after hours, I have made over 100 points this way during the crisis of 2015/16.
Can someone please explain to me how the price of the futures moves when the market of the underlying index is closed? Do the futures contracts end up in market orders when the market opens at 9am? If price moves away when the market is closed then how does it react when the market opens again with new orders but at a different index price level to the day before? So many questions, so little resources
@Jimmywins Futures are their own world compared to equities. They trade on a centralized limit order book on their own exchanges (CME Group, ICE, etc.). Data and market performance from Asia and Europe might affect how the US markets trade the following day so you still get a lot of speculative volume in the overnight session. A book that I highly recommend everyone reads is "Trading and Exchanges: Market Microstructure for Practitioners" by Larry Harris. It's dated but he breaks down the relationship between different traders nicely.
Thankyou I will check that book out for sure. But the futures price loosely follows the price of the index correct? So during market open and while the underlying shares are moving they will dictate the movement of the futures price? Why can I not find a comparison graph showing an index against the price for it's futures? Sorry for the question spam, I have found it hard to find anyone who can answer these questions! I appreciate your knowledge