The Levels That Matter After Dark

Lessons from the Darkside · Lesson 8

A level is not a trade. I know that, you know that, and at 10:45 pm with a position in mind we both forget it. So I mark my levels before the session, while I am still a sensible person.

Everything I do at night starts with a small set of prices marked on the chart before 6 pm. Not fifty lines. A handful, each with a reason. Here is the set, in the order I mark them.

From the day session

• The RTH high and low. The boundaries of the day’s auction. The overnight session frequently tests one of them.
• The settlement. The day’s official closing reference, and the price the reopen usually hovers near. Where the night sits relative to settlement is the first read of the session.
• The RTH value area and point of control. From a session volume profile of the day. The night either builds value inside it (continuation) or outside it (something changed).
• The RTH VWAP at the close. Where the day’s average participant is positioned. A night that trades far from it is stretched; a night that returns to it is reverting.

From the night itself

• The Globex initial balance high and low. Marked once the 6 to 7 pm hour closes. The reference for the rest of the night.
• The overnight VWAP. Anchored at the 6 pm reopen. Value for the night, updated tick by tick. I treat it as a generic indicator, nothing more: the average price the night has paid so far.
• The overnight high and low. Updated as the night goes. The levels the day traders will stare at in the morning.
• The Asian session high and low. Marked once Asia is done, for anyone trading Europe.

From the bigger picture

• Prior overnight high and low. Yesterday’s night often matters to tonight’s.
• Weekly high, low and VWAP. The levels that matter when the night travels far.
• Round numbers and obvious swing highs and lows on the hourly chart, because other people mark them and that is what makes them work.

How I grade them

Each level gets a grade before the session: A for a level where several of the above line up and I will take a trade on first touch, B for a level I will trade with confirmation, C for a level I will watch and probably not trade. The grade is decided in the quiet of the halt, not in the heat of the window, which is the only reason it is worth anything.

Two rules about levels

• Confluence beats precision. A zone where the settlement, the RTH VWAP and the Globex IB low sit within a few ticks is worth more than any one of them exactly.
• A level is where you plan, not where you trade. The trade comes from what price does at the level: a first touch and reaction, a spike wick and return, or acceptance beyond it. That is Lesson 9.

Questions people ask

What levels should I mark for the overnight futures session?

The RTH high, low and settlement, the day’s value area and VWAP, the Globex initial balance high and low once the first hour closes, the overnight VWAP anchored at 6 pm, the overnight high and low as they form, and the weekly levels. A handful with reasons, not fifty lines.

What is the overnight VWAP?

A volume-weighted average price anchored at the 6 pm Eastern reopen. It is the average price the night has paid so far, updated every tick. I use it as a generic value reference for the session.

Why grade levels before the session?

Because a grade decided in the quiet of the 5 pm halt is honest, and a grade decided while price is racing toward the level is not. The grade decides whether I trade a first touch, wait for confirmation, or only watch.

Next lesson: Setups That Survive the Night.

Photo: Nathan Jennings on Unsplash.