Over the past 250+ trading sessions for crude oil futures, most directional moves in the overnight session were triggered between 4am and 5:00am est. The next best premarket slot was 8:00am thru 9:00am est into the opening bell. I found that surprising… but it’s statistically true. Most likely imo due to the frequency of 8:30am est economic news reports.
The timeframe between 6am and 8am est generated on average slightly less than two directional price swings per calendar week. In other words, six or seven price oscillations per calendar month, on average. This means crude oil traders who start their day near the 6am est mark will sit thru three – four premarket sessions with nothing to do, for the chance of opportunity inside remaining one – two sessions of action.
That describes the premarket segment of trading, ranked like this in order of relative directional price movement…
4am – 5am est
midnight – 4am est
8am – 9am est
6am – 8am est
Crude oil traders intent on working inside the most optimal premarket time frames would target 4am est start onward, or midnight thru 6am est for an entire stretch of high-odds trading potential. Again, these statistics are based on an entire calendar year of the most recent crude oil futures price movement behavior.
In The Pits
Once the opening bell for pit session trading rings, the following time slots are listed most to least for frequency of directional price moves…
10:00am – 11:00am est
11:00am – noon est
2:00pm – 2:30+ pm est
1:00pm – 2:00pm est
9:00am -10:00am est
noon – 1:00pm est
Once again, a few things stand out from this study. Most of the real, true directional moves happened between the end of regularly scheduled economic reports in the morning and again into the final 30 minutes of pit session trading to square up positions. Overall the 2.5 hour collective time from 10am to noon and then 2:00pm – 2:30pm est had far & away the vast majority of directional price movement. All other hours combined, from midnight onward may have (at best) equaled these 2.5 hours of predictably concentrated movement.
Between the end of major econ reports and noon, then final minutes into the close of pit session trading. Where the majority of trading volume = directional price movement occurs. As you might expect, afternoon sessions are most active when the morning stretch has been muted and congestive in range. When morning periods are expansive, afternoons generally tend to be muted. Not always, there are sessions where mornings and afternoons are highly active. But again that’s a minority of times, statistically.
Of course it is true that anything can happen at any time in any financial market. I think that fact was emphasized last Thursday premarket when SNB made their historical Franc currency decision without warning. But we cannot build entire trading careers around such outliers of action. We build careers structured around statistical odds of probability that place optimal conditions in our favor.
It’s common for newer traders who are still fascinated by the whole trading = markets concept to desire sitting thru every possible waking hour of market movement. The human logic is, sit thru it all and miss nothing. Well, after a few years (or months?) of that, traders realize for themselves the fact that long-term idleness, boredom and unproductive actions degrades overall trading performance.
No lasting benefit comes from sitting thru long periods of sideways chop and erratic spikes in price movement, in order to be there when infrequent price moves actually unfold. I won’t bother preaching to the choir on this fact because you’ve either learned this already for yourself, or you are in the process of learning it now. Either way we will all agree on that same fact, eventually.
So with this statistical information in hand, I will structure my workday in favor of highest probable odds for success. Actively trading CL between the hours of 8am and noon est, then again (if necessary) from 1:00pm thru 2:30pm est will be my own work schedule. Please feel free to structure your own active trading day as you see fit. If that includes an earlier start, later start, or both… great. Mine will be adjusted according to lifestyle demands first and potential price behavior second (in order of importance) going forward.
Above all else, my daily trading goal is +50 cents/ticks of greater (per single CL contract) and everything else is immaterial to that. Again, you are free to structure your own business plan and goals as you see fit. If my objectives are met in the first few minutes of a given session, great. If that completes prior to 9am est, great. If it takes until noon to happen, fine. If it takes the afternoon stretch right to the 2:30pm close for daily process to complete, that’s ok with me, too.
Trading to “trade well” or trading all day to see how many bazillion ticks profit can be made have no place at all inside my personal trading plan. I am totally seeking +50 cents/ticks ($500 per contract) daily and done as the personal trading goal.
Some days, that will not happen. I will finish with less than that, up to and including a -50 cents/ticks max capped loss. Other days will exceed +50 cents by various margins. The remaining days will wrap near +50 as successfully complete. Overall, if ten sessions out of each twenty per calendar month average +50 ticks while the other ten sessions wash one another of losses & gains, that results in +500 cents/ticks compiled per month. I’ll personally settle for half that or even less, gladly. Who wouldn’t?
Part Of The Plan
And last but not least… part of my trading operations plan is to grow, foster and create one a premiere crude-oil trader’s educational program. I have no idea what’s out there in the public realm now available to traders, but I believe we do offer a premium program now and that will continue to develop in the days & weeks ahead.
That age-old saying about doors closing and others opening is timeless and true. Recent changes in the FX market, if indeed there really will be a spot FX market at all going forward, along with utter collapse in Russell 2000 liquidity has guided me to a central focus of attention. For sure there are many other tradable instruments out there and quite frankly our CM Patterns method excels in any of them where you can actually get filled. By no means do I suggest that everyone in the world needs to trade any certain thing. But for our daily live program here, it will be crude oil trading until otherwise noted.
For more daily updates from Austin, visit his blog at Coiled Markets.