Money and loans

Point-and-figure charting has been a primary tool of day traders for many years. Using the minimum price movement as the box size and a 3-box reversal, many traders will keep a continuous, although lengthy, chart of day-to-day price movement. Buy and sell signals can be taken in the standard manner, but day traders are most likely to use these charts for identifying countertrend support and resistance levels. Intraday point-and-figure, as well as moving averages, often show frequent changes of direction before a new buy or Sell signal occurs, even when the minimum box size is used. Trend methods are best applied to short-term overnight positions in which the size of the move is much larger.

Holding a position overnight involves margin and, above all else, greater risk. it also increases the opportunity for larger profits. In moderately active markets, the opening gap, the difference between the prior close and the next open, can be one-third to one-half the size of the normal trading range. Markets that are traded in one time zone but reflect the business of a completely different geographic region, have larger systematic gap openings. For example, the Nikkei 225 is traded at the Chicago Mercantile Exchange, but the Nikkei reflects the value of the Japanese stock market. While the day session in Chicago is open from about 7:00 A.M. to 3:00 P.m. local time, the time in japan is 10 hours earlier, 9:00 P.M. to 5:00 A.M., a period when there is no business activity in Asia. When Chicago opens, it must immediately reflect the price of the previous closing session in japan; therefore, it gaps to that level. This same situation happens to a lesser degree for European currencies, which are actively traded on Chicago’s IMM. When those markets open at 7:20 A.M., Europe is coming back from lunch and all local economic news has already been absorbed into the market.
We can see that the currencies and metals, representing markets actively traded 24 hours, have the largest overnight gaps. Viewing world markets only during the U-S. business hours can put a trader at a disadvantage and force him to deal with unpredictable, uncontrollable risks. This has prompted many traders to watch the markets through both day and night. Most computerized systems have no trouble continuing their calculation through various sessions.