Which Trading Hour Is The Best?

There is no best trading hour. Backtests and statistics of five different futures contracts reveal that most of the price action is random throughout the trading day. However, by implementing one or two extra variables, we find some potential trading edges or strategies.

Which trading hour is the best? Does the time of day make a difference when trading? When should you buy and sell during the trading day? Seasonal trading strategies can take many forms and in any time frame. This article looks at intraday data for some of the most traded futures contracts.

Let’s go straight to our backtesting:

Table of contents:

In order to find the best trading hour, we look at five different futures contracts: S&P 500 (ES), USD/CHF, the oil price (CL), gold (GC), and silver (SI). Our futures data start in July 2010 or July 2011.

Which trading hour is the best? Backtest no. 1

In test no. 1 we buy at the open every hour and sell at the close of the trading day. The close is defined as the close of the “regular” trading hours local time.

For example, the S&P 500 futures contract is traded in Chicago and we defined the open at 0830 local time and the close at 1500.

For gold, oil, and silver the open is 0930 and the close is 1600 because it trades in New York.

All of the contracts trade much longer (and earlier), but for convenience, we defined the open and close like above.

We test one-hour intervals: 0830, 0930…..1530. Thus, the last time interval is only 30 minutes and we only look at regular trading hours, not the 23-hour session.

Oil:

We start by testing the oil WTI contract:

The first column shows the time when we enter the trade: 93 000 is 0930 and 123 000 is 1230 etc.

As you can see from the table, the average percentage gains are small.

Gold:

In the gold price the average gains are practically zero:

When Should You Buy And Sell During The Day?

Silver:

Just as in gold, it seems to be complete randomness in the silver contract throughout the trading day:

Which Trading Hour Is The Best? backtest

S&P 500:

The bullish market since the financial crisis in 2008/09 has created a positive drift from the morning until the close (in addition to the overnight edge):

Which Trading Hour Is The Best? Trading strategy

USD/CHF:

Perhaps as expected, the USD/CHF rate seems pretty random:

Which trading hour is the best? Backtest no. 2

We make a second backtest, but we only look at the returns per hour during the trading day.

If you buy the S&P 500 at the open (0830) you sell one hour later (0930) and so on:

S&P 500: