The Right Time of Day to Trade

If you day trade, knowing the right time of day to trade for your products is going to be a vital part of your day trading rules. Knowing just how your strategy performance is likely to be impacted by range and volume variation throughout different periods during a session, can really help you to focus your efforts on a primary window of opportunity and give your strategy the best chance of success.

Raw Stats

Here I’ve taken the 1 year’s worth of 15min data from the FDAX and averaged the range and volume data to get a better idea of how trading activity varies over the whole of the Eurex session.

FDAX Average Range Chart

You can clearly see in this chart that there are peaks and troughs in trading activity throughout the day – and it’s pretty obvious when you think about it. Around a market’s open and close there’s usually a flurry of activity as new information gets priced in and positions are covered by day traders for example. During lunchtime, trading slows as many traders are away from their desks. So bigger moves are more likely to happen at the start and end of a product’s primary session.

As day traders, we thrive on volatility and as movement usually breeds more movement, it’s important to identify the exact periods when trading activity tends to be highest in the product you’re trading. I realize that a lot is said about not trading right on a market’s open and this may well be true – there’s frequently a great deal of back and forth price action at the very start of a session. But the elevated activity often seen in the early part of a session can be great to trade too.

It should be said that although the relative calm heading towards lunchtime may not offer the greatest opportunities for profit, it can be a useful time of day for beginners to practice.

Trade Plans

At Netpicks, we’re always taking into account that finding the right time of day to trade can make or break a trade plan. What can be an absolutely fantastic plan to trade in a certain trade window, can be utterly useless in another. Even a relatively small difference can sometimes make a fair bit of difference to performance.

A large part of trading successfully is about understanding your trading strategy and identifying the very best opportunities to trade – by recognizing which times of the day have a higher probability of the type of movement and volatility conducive to these opportunities, you’ll be able to focus your efforts and capital on these periods.

Trade well.

For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at NetPicks.com.