Overnight Session Analysis

Entry Logic

• Entry trigger: Identify a key support or resistance level that has formed in the overnight (Globex) session.
• Confirmation: The level is tested and holds in the first 15 minutes of the pre-market session.
• Timeframe: 60-minute chart for overnight analysis, 5-minute for entry.
• Location context: The level represents a significant area of buying or selling pressure from the overnight session.
• Market condition: A market that is respecting overnight levels.

Exit Logic

• Profit target: The next significant overnight or daily level.
• Scaling out: Not recommended.
• Trailing stop: A manual trail bar-by-bar on the 5-minute chart.
• Signal failure exit: Exit if the overnight level breaks.
• Opposite signal exit: Not applicable.
• Time expiration: Exit if the trade is not profitable within the first hour of the regular session.
• Momentum loss: Exit if the price stalls at the entry level.

Stop Loss Structure

• Hard stop: 30 cents beyond the overnight level.
• Soft stop: A close beyond the overnight level.
• Max dollar loss: $450 per trade.
• Max percent loss: 0.9% of account capital.
• Structural stop: Beyond the high/low of the overnight session.

Risk Management Framework

• Risk per trade: 0.45% of account equity.
• Maximum daily loss limit: 1.8% of account equity.
• Maximum weekly loss limit: 4.5% of account equity.
• Maximum drawdown: 14% from peak equity.
• Risk-reward ratio: Minimum 2:1 required.

Position Sizing Model

• Sizing approach: Risk-based position sizing.
• Volatility adjustment: Not applicable.
• Conviction sizing: Not applicable.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions to avoid: A market that is ignoring overnight levels.
• Specific setups required: A clear, well-defined overnight level.
• Stock/instrument requirements: Index futures (e.g., ES, NQ) or highly liquid ETFs (e.g., SPY, QQQ).
• Time of day restrictions: Trade only in the first hour of the regular trading session.
• Chop/news avoidance: Avoid if there is major news that could invalidate the overnight levels.

Context Framework

• Trend direction: Trade in the direction of the daily chart trend.
• VWAP relationship: The overnight level should align with the pre-market VWAP.
• Moving average relationship: The 200-period SMA on the 60-minute chart should support the trade direction.
• Range location: The trade is taken at the boundaries of the overnight range.
• Higher TF alignment: The daily chart should show a clear path for the trade to move.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move.
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: Be patient and let the trade work.

Time Rules

• Optimal window: 9:30 AM to 10:30 AM ET.
• Times to avoid: After 10:30 AM ET.
• Session notes: This strategy is most effective in markets that have a strong institutional presence.

Setup Classification

• A+ criteria: A very clean overnight level that is respected on the open, with a strong confirmation candle.
• A criteria: A good overnight level with a decent confirmation.
• B criteria: A less-defined level or a weak confirmation.
• C criteria: Avoid all other setups.

Market Selection Criteria

• Instrument requirements: Index futures or highly liquid ETFs.
• Volume/liquidity: High volume is essential.
• Volatility: Moderate volatility is ideal.

Statistical Edge Metrics

• Win rate: 60%.
• Avg win: 2R.
• Avg loss: 1R.
• Profit factor: 1.2.
• Expectancy: 0.2R per trade.

Failure Conditions

• The strategy fails when the market ignores the overnight levels and trades in a different direction.
• Avoid when there is a major gap up or down on the open.

Psychological Rules

• Trust the levels that have been established overnight.
• Do not get shaken out by the initial volatility at the open.

Advanced Components

• Regime detection: Not applicable.
• Filters: Not applicable.
• Correlation: Be aware of how other related markets are behaving.
• MTF alignment: The daily and weekly charts should support the trade direction.

Location

• Strongest: In markets with a lot of overnight activity.
• Weakest: In markets with very little overnight activity.