Ask Colin

How do you deal with markets that trade 24 hours?

Twenty-four hour markets are posing quite a problem for technical analysts. I have yet to see anyone propose a clear solution and I guess it is going to take some time as people learn how to deal with them.

I suppose that it is going to depend on whether your intention is to trade all the time zones continuously, or to only trade your own time frame.

In the former situation, it is difficult for one person to do it, because they cannot be awake all the time. Institutions would seem to manage this by one team handing over the positions to the next team as their time frame closes down. Where the positions are short term, it may be sufficient for them to run continuous short term bar charts - say five minute bars. Point and figure charts are also popular, because they do not have a time scale. Similarly swing charts or their cousins Kagi charts. Isn't interesting how "old" techniques find new uses?

In the latter situation, it is no different to trading a market that is closed overnight. The opening price will reflect what has happened while the market was trading overseas, just as a sharemarket reflects news that comes out while it was closed. Because the opening price is so important for candlestick charts and some aspects of bar chart analysis, the opening price must be suspect in a twenty-four hour market chart, but very important if you are only charting one market time zone.

Futures markets are also a challenge because the volume and volatility may be quite different in the "after-hours" market. It would seem prudent here to run charts for the day market only, the night market and also the "twenty-four hours" market. Note that most futures markets close for an hour or two so there is strictly a close and open price, but they may be much less relevant than for a normal day-only market.

I hope these ideas are of use.