Managing Overnight Futures Positions with Trend and Risk Filters
Summary
The document offers practical filters for deciding whether to carry a futures position overnight. It recommends aligning the position with the broad trend, checking agreement across timeframes, requiring some unrealized profit, and considering whether related overseas markets support the direction. It also suggests using the five-day moving average as a directional check and limiting exposure when the profit cushion is small.
A second discussion stresses that overnight gaps can erase gains or deepen losses, especially when domestic contracts react to foreign markets. It favors closing most short-term trades before the session ends, while allowing exceptions after a strong breakout accompanied by higher volume and open interest, provided overseas markets confirm the move. Historical examples of large opening gaps illustrate the risk, but the article offers no systematic testing, and its claims about likely post-gap reversals and adding to profitable positions are anecdotal and should not be treated as guarantees.
Key ideas
- Carry positions overnight only when their direction agrees with the broader trend and, ideally, shorter timeframes.
- A profit cushion may help absorb adverse opening gaps, but it does not remove overnight risk.
- Check overseas market moves when domestic futures contracts are sensitive to them.
- A breakout with rising volume and open interest may support an overnight hold if related markets confirm it.
- Keep exposure limited when the profit cushion is small and respond if the trend reverses.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.