The Alchemy Intraday Time Zones indicator alerts you to the various widely recognized trading time zones during the market day. This indicator is an excellent tool for the daytrader.

In many markets such as the S&P futures, Nasdaq futures and other daytraded markets, it has been discovered that there are distinct, repeatable patterns in the market relating to certain times of the day. For instance, many daytraders will not enter trades in the first 20-30 minutes of the market due to increased volatility and lack of a clear trend development.

It is important to note that these times are “expected” time patterns and are not to be construed as a stand-alone trading system or as being 100% accurate. However, the time zones are accurate and consistent enough to assist the daytrader in determining “expected” reactions in the market in the time zones. Opening Session You will notice that the first 20 minutes of the market day are not included in the

Opening Session

This is because most daytraders do not trade this period due to the extreme volatility and lack of trend development during this time. Many of the NYSE stocks are delayed in opening in the morning due to order imbalances and this takes a few minutes to resolve itself.

The Opening Session will many times set the tone for the rest of the trading day. If there is a large move in the Opening Session without any significant retracement in and around the end of the Opening Session, expect the likelihood of a strong trending day in that established direction. Normally, the market will put in a counter-trend move of the established trend in and around the end of the Opening Session. The use of other technical indicators such as the Trading Alchemy Divergence Indicator or possibly other indicators such as stochastics, MACD or moving average crossover indicators are used to help identify possible counter-trend moves.

Mid-Day Period

The Mid-Day Period is usually the least volatile time of the trading day. It is during this time of the day that many of the floor traders in the trading pits take a lunch break and actually leave the trading pits. This usually creates light volume, which in turn can cause exaggerated, choppy movements in price. When volume dries up, it allows the smaller floor traders a chance to run and gun for stops without having to commit large amounts of capital. Many times, well-placed stops can be hit during this period due to the lighter volume conditions. Many traders will not enter short-term or daytrades during this period. Even if the market is in a strong trend coming out of the Opening Session, the Mid-Day Period will usually be less volatile than other times of the day. Many traders prefer to monitor their positions or try to range trade during this time. The use of other indicators to help identify short-term highs and lows could be used to attempt range trading during the Mid-Day Period.

Resumption Period

The market at this time is expected to resume its trend for the day, or if there is a particular bullish or bearish bias for the day, move in the direction of the high or low set earlier in the day. The market is expected to test it’s high or low made earlier before the quieter lunch period. Many traders enter their afternoon trades during the Resumption Period.

Afternoon Activity

Many times, the Afternoon Activity occurs when the market attempts to relieve the buying or selling pressure built up throughout the day by moving counter to the established trend of the day. The market will many times test the high or low established earlier in the trading day at this time. Traders can watch for signs of a possible reversal or continuation of trend and enter their trades accordingly.

Late Afternoon Activity

If the market does not move counter to the established trend during the Afternoon Activity, then watch for the move to occur during the Late Afternoon Activity. If the counter trend move occurs during the Late Afternoon Activity, the move should be much stronger.

Remember, the Alchemy Intraday Time Zones are not intended to be a trading system. These time zones have been recognized to be fairly consistent in the more liquid daytraded markets. This indicator’s purpose is to assist you in identifying the times when certain market events regularly occur. Use the Alchemy Intraday Time Zones indicator with other indicators to suit your own style of trading.