In this article, I will describe patterns of price behavior on an intraday basis and their implications for trading. I believe that an adequate consideration of how price changes actually occur during the day will challenge traditional methods of trading and open the door to new ways of viewing and analyzing the markets.
The Challenge of Stationarity
I’d like to begin this article with a set of descriptive data on the ES market, the main market that I trade. For purposes of convenience, I looked at the market between October 9th, 2003 and January 16th, 2004, which gave me 68 full days of data. I broke down each trading morning (9:30 ET - 12:00 ET) into half-hour segments to see how each segment compares to the ones around it. Below is a table of the average range and standard deviation (in ES points) for each 30 minute period in the morning
Fundamentals of Short-Term Trading
