Which Time Of The Day Is The Most Volatile In Trading? (Insights for Stocks, Gold, Oil, And Swiss Franc)

What time of the day is the most volatile in trading? Most traders assume the first and last hour of trading (in any market) is the most volatile of the day. News from overnight trading needs to be discounted when the market opens, and during the last hour funds and traders rebalance their portfolios. Is it correct that the first and last hour is the most volatile of the day? In this article, we look at which time of the day is the most volatile in stocks, Swiss franc, gold, and oil.

In stocks, the most volatile time of the day is, on average, the first hour. The least volatile time of the trading day is the last hour. In the other markets, the most volatile time of the day varies.

Related reading: – A massive library of trading strategies

Let’s explain how we backtested and came to our conclusions:

How do we test which time of the day is the most volatile in trading?

We use US official exchange trading hours, meaning 0930 to 1600 (930 AM to 4 PM) New York time. Thus, the 6.5 hours of trading needs to be divided into “sessions”:

We divide the trading day into four parts:

  • The first hour of trading
  • First midday session – the next 2 hours
  • Second midday session – the next 2.5 hours
  • The last hour

We test the following four futures contracts (not ETFs):

  • The S&P 500 contract
  • The Swiss Franc contract
  • The Gold contract
  • The ETI crude oil contract

We chose these four because they are all pretty different from each other and have different attributes.

The S&P 500 and Swiss franc trade in Chicago and the latter in New York. We use 0830 local times as open in Chicago and 0930 in New York, and 1500 local time as close in Chicago and 1600 in New York.

We use a 200-day moving average to smooth the data. This means the volatility results are based on the last 200 days and will move slightly up and down (smoothed).

What is volatility?

Let’s first define volatility. The money manager Fidelity defines volatility like this:

Volatility is the rate at which the price of a stock increases or decreases over a particular period.

The more the price fluctua