Pivots, Patterns, and Intraday Swing Trades: Derivatives Analysis with the E-mini and Russell Futures Contracts, + Website

CHAPTER 1

A Three-Frame Day

For the longest time as a commodities position trader, I was confused by day trading, especially day trading the S&P 500 futures contract. The lengthy trading period of nearly seven hours was itself an impediment to understanding the price action. The day's trading behavior patterns and events often seemed strung together at random, encouraging the deceptive practice of attributing trend direction to unfolding news events. There was no making any technical sense of it from one hour to the next. But it cleared up almost immediately when I began to view the day as divided into three separate and distinct trading sessions: the 1st Frame, the Midday Frame, and the 3rd or Last Hour Time Frame.

These are just names. In truth, the periods don't last for exactly the same time each day. The 1st Frame of the day can last about 1 hour and 45 minutes, give or take about 20 minutes. The Midday Frame can last anywhere from about three to about three-and-a-half hours. And the Last Hour Time Frame gets whatever is left over, occasionally not distinguishing itself at all. Although traders often refer to this third period as the “last hour,” I have found it to begin earlier and extend longer than the last hour of the trading day.

To be of any practical use, however, these time periods should be treated as fixed. In that way, a rule-based approach can serve to compare daily action in the transition windows from one period to the next. Each of these three main periods ...