I have been asked several times to put this information into a thread in a condensed form along with the class of indicators that I have coded for sessions. So here it comes. The idea is to explain, why it is useful to use sessions, how to set up the data base and the charts, and then find an appropriate solution for each instrument. Also I am not able to put this up for all instruments, so I hope to gain some new experience as well. I use NinjaTrader for my charts and the settings, but orther software such as MultiCharts has a similar session manager, so you can do the same thing there.
Why use Sessions?
If I just display ES with the default NinjaTrader session template, I obtain a chart that display data from 8:30 AM CT to 3:15 PM CT. That is the traditional way, how charts were drawn. Most of the charts in the book by Al Brooks are set up this way, so there is nothing wrong about it, or is it? Do you really need the data of the night session. Do you want to know where ES traded during the European Session, is this useful information?
If the price action of the night session, the Asian session and the European session is irrelevant, we can stop here and continue to use charts in the way Al Brooks does. By the way, I do not want to discredit him, but I love his book. I just wanted to show that it is not self-evident that the data prior to the open is needed to setup a chart.
Some Arguments in Favor of Sessions
(1) Many instruments are traded around the clock. This is particularly true for FOREX. Although volume and volatility are still highest during the London/ New York overlap, important trading volume for EURUSD is generated during the European session. Important trends now often start prior to the New York open.
(2) High and lows of the Asian and European sessions are important pivots that are tested during the US session, so you should know where they are.
(3) Even for pure US instruments such as ES, volume shifts from the day session to the early morning. This is particularly true on Thursdays and Fridays, as has been shown here:
(4) The night session range, which can easily be detected on a 30 min or 60 min chart is an important reference for index futures as well.
One Argument against Sessions
The session end cuts off all types of bars, including minute, volume, range and tick bars. This means that the last bar of the session can be of lesser importance (smaller period, less volume, smaller range, fewer ticks). So if you calculate a moving average, it will be a little bit skewed due to that bar. However this effect is rather small.
Conclusion
Do not eliminate the price action of the night session but use this information, as it is more recent than the price action of the prior day. Set up sessions on your chart, to allow various indicators to access them.