As we have learnt, all major pairs trade most actively during the European and the American sessions. However, sometimes important moves happen after the end of the American session when there is not enough volume. This it what we are calling overnight moves but obviously the relevance of that term depends on the time zone you are in
We need to know that:
1. Most legitimate moves happen during the American and European sessions when the volume is at its peak.
2. When important moves happen after the American session closes (and while the Euro and Asian Session is closed), these moves aren’t backed by a high amount of volume and therefore may have a high probability to regress back to where it was before.
How can this help me as a trader?
After a good run up, I’ve seen many traders trying to go short after the American sessions as they believe there market will retrace back as there is not enough volume (and vice versa for a long scenario after a nice drop). But at times the market makes new highs and lows after-hours getting caught in an unfavorable position.
Also a lot of traders set their limit orders above the high of the day (long) or below of the day (short). If the market hits those orders after-hours, it is likely to come back as there is not enough volume to back that move.
These moves are not consistent or based on any form of predictable behavior, therefore – Never trust after-hours moves!