Proper timing is a crucial aspect of successful short-term trading. Engaging the marketplace during periods of maximum participation increases the efficiency of trade execution as well as the probability of recognising opportunity.
Equities, futures and currencies all have unique trading sessions, marked by periods of extreme activity and lagging participation. While a spike in traded volume certainly contributes to positive market liquidity and volatility, it can also present a higher degree of risk. Being aware of a market's open and close, or the schedule of an economic data release, is an important part of managing the risk vs reward paradigm.
Equities: Open And Close
Global equities markets typically experience an increase of traded volumes near the opening and closing bells. Listed below are the times of market open and close (per the market's local time zone) for some of the world's most prominent equities markets:
|New York Stock Exchange (NYSE)||9:30 AM||4 PM|
|Japanese Exchange Group (JPX)||9 AM||3 PM|
|London Stock Exchange (LSE)||8 AM||4:30 PM|
|Australian Securities Exchange (ASX)||10 AM||4 PM|
|Frankfurt Stock Exchange||9 AM||8 PM|
|National Stock Exchange Of India (NSE)||9 AM||3:30 PM|
Market open is an important time of day for traders and investors alike. The minutes preceding and following a market's open can be extremely active reflecting overnight news items, institutional investment practices and retail trading activities. Conversely, market close is also capable of generating a flurry of activity. As day traders exit the market and longer-term investors look to take positions for the coming session or sessions, enhanced pricing volatility may ensue.
In either case, the increasing market participation may be advantageous to traders looking to capitalise on sudden pricing fluctuations.
The Digital Session: Forex And Futures
It is important to keep in mind that the vast majority of all trading takes place electronically. Market access provided via internet connectivity gives individuals the ability to trade global markets on a 24/5 basis. While staying abreast of favourable times in which to trade equities is relatively straightforward, periods of heightened market participation vary in the futures and forex markets.
In futures, the Asian-Pacific, European and American sessions are the three major international trading days that substantially influence volume. Within each of these sessions, there are premium trading times in which heightened levels of liquidity and volatility afford traders enhanced opportunity.
Listed below are a few daily time slots that consistently stimulate trading volume, producing favourable conditions for active futures traders:
|German Open||6 AM|
|London Open||7 AM|
|New York Open||1:30 PM|
|European Close||4 PM|
|American Electronic Close||9:15 PM|
Aside from the CME's daily electronic close at 9:15 PM, each of the above times serves as a guideline. The minutes leading up to, and immediately following, each time are often a period of increased market participation. Each global futures market (and product) is unique; it is crucial that a trader identifies the tendencies of a chosen marketplace before the commencement of trading.
In a similar fashion, the forex includes many international markets, thus creating a 24-hour trading day. However, instead of optimal periods being exclusive to a traditional open or close, the premium times to trade forex often occur during "overlap." Overlap takes place when two global trading sessions coincide, increasing the number of market participants. As a result, market liquidity and pricing fluctuations more readily increase.
Listed below are the overlapping time periods in forex:
|European-American||12 PM to 4 PM|
|Asian-European||7 AM to 8 AM|
|Australian-Asian||11 PM to 6 AM|
Identifying the optimal time in which to enter or exit a given market is a trader-specific exercise. While periods of enhanced liquidity and volatility may be desirable for some traders, others may see an abundance of risk. An individual's capital resources, risk tolerance and style are considerations that must be taken into account when deciding on the best time of day to trade.
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