2012issue C0441
Opening-auction prep binds fair value, futures pivots, and order hygiene
A written premarket checklist is required before an opening-only procedure plans entry and exit. The same sequence gathers macro context, index-futures pivot points, a cash-index fair value remainder, and resting-order hygiene so entry, exit, and abstention are decided together.
- Session preparation starts with macro economic conditions that can move any instrument through currency and commodity linkages, not only currency markets.
- A written premarket checklist is required before entry and exit points are planned, and names with extra news stay off the opening sheet.
- Fair value from the cash index and pivot points on index futures set where futures should trade and what chart condition the session will test.
- Opening bids and offers that sit too far from premarket prices are cancelled and replaced or left working with adjusted prices.
The open is written before the trade is planned
The archive presents the cash open as an opening-only procedure that starts on paper. A written premarket checklist is required before entry and exit points are planned.
Session preparation is framed as starting with macro economic conditions that can move any instrument through currency and commodity linkages, not only currency markets.
What the premarket checklist gathers
The premarket checklist is a fixed pre-open sequence that gathers news, levels, and order status so the opening decision can be run the same way every session. It includes name and sector news, earnings and rating announcements, overnight and premarket activity, and pivot levels on index futures.
A pivot point is a prior-session futures level checked before the cash open so a repeatable chart condition can be turned into a hypothesis for the session.
After the overnight check, prices are to be changed only when the instrument is already trading at materially different levels.
Fair value and the opening envelope
An expected open location and a fair-value remainder from the cash index are used to judge where index futures should trade through the session. Fair value is that cash-index remainder, used before the open to judge whether index futures are rich or cheap relative to where they should trade.
Futures trading above that remainder are treated as implying an immediate upward move in the related stocks, and futures trading below it the reverse.
The opening envelope is the morning price band used to bound the opening-only plan. It is described as 0.5 percent to 1.5 percent and is tightened when the open stands farther from fair value.
Resting orders and what stays off the sheet
Opening bids and offers are compared with premarket prices and are cancelled and replaced or left working with adjusted prices when they sit too far from those levels.
Names carrying extra news are removed from the opening sheet so the opening-only procedure is not mixed with event-driven names.
All readings on this track · 9 readings
- 2002Opening-only orders, posted stops, and paper fills as first-class rules
- 2002Opening auction grids and shakeout-resistant exits
- 2003Opening-only limits and priced exits
- 2005Pre-open indications, limit fills, and morning levels
- 2005Pair-bias bands and opening-print priority
- 2008A case study of checklist-driven opening-auction and pairs work
- 2010Same-side opening auctions and pair use of capital
- 2012Opening-auction prep binds fair value, futures pivots, and order hygiene
- 2013Prove opening and pairs rules before automation