Best Assets and Best Times of the Day to Trade

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Best Assets and Best Times of the Day to Trade

I’ve broached this topic in the past during the course of my other posts, but only briefly and felt it would be wise to dedicate an entire space to it.

As always, I recommend that any individual trade at a time convenient for them and also one in which their mental energies are high, as to not lose concentration and focus. It is no good to wake yourself up at 4AM if you’re only going to be groggy, sleep-deprived, and not aptly and effectively tuned in to what you’re doing. It might also cause you to force trades since you technically coerced yourself to get up in order to trade. In the past, I adjusted my sleep schedule in a way such that I’d fall asleep in the evening and wake up at around midnight (even before), so I could take advantage of the beginning of the European market hours as a U.S.-based trader. I maintained this during Friday and Saturday nights when the markets weren’t open in order to not disrupt my schedule.

If you have the flexibility in your schedule to alter your sleeping patterns in order to trade during a desired time window, this is great. But I realize that many, due to work/school/family/outside engagement demands, don’t have the ability to afford these types of accommodations just for trading. After all, if you wish to maintain positive relationships and maintain continued success with regard to school/work outcomes, then it’s really infeasible to be overly “selfish” in adhering to a set schedule that could interfere with those things.

In fact, I’ve heard of some traders lament the fact that personal relationships and even marriages dissolved simply because they had to trade at certain market hours to take advantage of the peak action of an asset they traded or because they had to check the markets so frequently. I think it’s a topic that simply isn’t addressed enough as it pertains to trading and something that might strike a chord with those with more “hardcore” mentalities.

I know there are those who have the mentality that you need to forgo personal relationships in order to be successful at their endeavor(s) – whether it’s trading, an athletic pursuit, school, their careers. Some genuinly don’t feel the need to have close friendships and relationships and that’s okay. But there is always a way to integrate the two together and rarely a need to dive head-first into something at the expense of everything else in life.

(The potential consequences of being overly gung-ho in your trading efforts.)

And sometimes, naturally, you may simply not have the time altogether for trading. For the span of several months, I often do not trade at all because I am a full-time university student and simply cannot prioritize trading or posting here to my blog.

But if you do have the time to trade and can commit to it for a small period each day or most/some days, simply trading at hours most amenable to your schedule is best. Now depending on where this time window falls, it can determine which asset(s) you decide to trade.

For instance, if you are trading the European market hours or the U.S. session, or when these two markets overlap, you can never go wrong trading assets with European currencies or those that also include either the USD (U.S. dollar) or CAD (Canadian dollar). However, if you trade after the U.S. market hours (saw 7PM-12AM EST or so), you might actually be best off trading a currency pair containing one or both of the JPY (Japanese yen) or AUD (Australian dollar), as these currencies will be more actively trading during the openings of the Japanese and Australian trading hours.

In terms of market hours, here are rough approximate estimates of when the three main continental market sessions open and close and the corresponding uptick you can expect in volatility of various currencies during these times:

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Asian session: 11PM-8AM GMT
European session: 7AM-4PM GMT
North American session: 12PM-8PM GMT

Here is a visual of the overlap:

Here are personally some of my favorite currency pairs to trade:

EUR/USD – Easily the world’s most traded pair given that it includes the world’s two most popular currencies. The U.S. dollar is first while the Euro, despite its inception as recently as 1999, is second. Because of all the liquidity in this market, its price moves are pretty consistent overall and it’s not overly volatile. Great during both European and U.S. market hours.

USD/CHF – I traded this all the time back at Trade Rush. The price moves aren’t as strong as that of the EUR/USD, given that the Swiss Franc simply isn’t as popular as the Euro. But given that the USD is part of the pair, it acts to stabilize it and drive its volatility. Naturally, U.S. economic news largely determines where this currency trades. Also great during European and U.S. market hours.

GBP/USD – Pair tends to trade pretty well in accordance with the EUR/USD. They both trend pretty heavily in the same direction and have a very high correlation as a whole. If the EUR/USD isn’t trading as well as you might expect or the trade set-ups simply don’t seem to be there, going over to the GBP/USD could be a good decision.

GBP/JPY and EUR/JPY – These pairs definitely have a good deal of volatility. Yet I do find that the GBP/JPY and EUR/JPY do offer a lot of good trade set-ups and obey their support and resistance levels pretty well. Good for European trading and also viable during the Asian session as well when the Japanese Yen trade hands at a decent clip by virtue of that market session being active.

USD/JPY – Doesn’t move as much as many other USD-based pairs, but definitely a viable option for those trading the Asian session (perhaps U.S. traders who might choose to trade during the evening), like the above pairs.

USD/CAD – Given these are both North American currencies, the strongest and most robust price moves will occur during the hours of the North American session.

And indeed, payout can be a big determinant of what assets to trade, but ensuring that these have sufficiently volume in their markets when you do trade is a very important factor to consider overall.

Markets

Which markets and assets best suit day trading? We explore the importance of volume, volatility and liquidity when choosing the right underlying markets to day trade. From forex, to stocks or cryptocurrency, we help you find the right trading market for you.

Before you start day trading in the financial markets you will have to decide where to focus your energy. Fortunately, advancements in technology have resulted in a diverse range of trading instruments now being available. This page will break down the main day trading markets, including forex, futures, options, and the stock market. It will cover their benefits and drawbacks, as well as look at which is the best day trading market for beginners. The information will help you decide which market best suits your individual circumstances, from lifestyle constraints to financial goals.

Stock Markets

The stock market remains one of the most popular types of online markets for day traders. Quite simply, you buy and sell shares of a company.

The allure is obvious, a straightforward trading vehicle and the chance to profit from some of the world’s most famous companies, from Amazon and Google to Shell and BP.

Plus, if you do opt for day trading the stock market, you have a number of huge indices to choose from, including:

  • FTSE 100 – This contains one hundred of the largest companies listed on the London Stock Exchange.
  • Dax 30 – This blue chip stock market index is formed of thirty major German companies listed on the Frankfurt Stock Exchange.
  • Hang-Seng – The 50 constituent companies are ranked by market capitalisation and are listed on the Hong Kong Stock Exchange.
  • NASDAQ Composite – Here you will find some of the world’s technology titans.
  • S&P 500 – This lists five hundred of the most widely traded stocks in the US.
  • Dow Jones Industrial Average – This index contains thirty of the largest and most influential companies in the US.

Due to its popularity, you can also now find a wealth of stock market trading courses and other resources online, from books and PDFs to stock market forums, blogs, and live screeners.

Key Considerations

Despite plenty of opportunities and trading with market statistics on your side, there is fierce competition in the major stock markets. In addition, if you were to trade in the US, for example, you could be required to hold a minimum of $25,000 in your trading account.

So, trading the stock market may not be the right choice for beginners with limited capital. Instead, you may be better off turning your attention to one of the different markets below.

However, if you want further guidance on day trading the stock market, see our stocks page.

Futures Markets

Futures are another one of the popular markets for day trading from home. A futures contract is an agreement between a buyer and a seller to conduct a particular trade at a specific date and price in the future.

As a day trader, you look to profit from price fluctuations between when the buy/sell contract is made and when the position is closed.

Often, futures contracts will centre around commodities, from precious metals, such as steel and aluminium to fats, foods, and oils.

The purpose of futures contracts is to mitigate unpredictability and risk. For example, if you knew you were going to produce one thousand litres of milk in a year’s time, you could sell it at the then market price. However, perhaps dairy-free milk will continue to surge in popularity over the next year and market price will fall. The solution – agree to sell the milk now at a pre-determined price so you can guarantee a certain degree of profit.

Trading in the financial futures market operates in a similar way. You are betting a particular index will hit a specific level at a certain point in the future.

Key Considerations

However, before you decide day trading the futures market is for you, there are some important factors to take into account:

  • Capital – Although it requires less capital than trading stock markets, a few thousand dollars is still recommended as minimum starting capital. Although that will vary depending on the futures contracts you decide to trade. The S&P500, for example, will require between $3,500 to $5,000.
  • Flexibility – Trading in the futures markets does promise some flexibility. However, official markets change dependant on the futures contract in question. So, you will need to ensure you are out of any positions before the close of trading for your particular contract. Premarket and post-market trading is available in the futures market though, as there is plenty of volume and volatility in the European, Asian, and US trading sessions.
  • Narrow – Trading the stock market game promises a vast array of trading opportunities on numerous stocks. However, whilst some day traders follow volume and volatility, many trading in the futures market focus on one particular futures contract. So, if you want a diverse day trading experience, you may want to consider trading on different markets.

Overall, if you want to start trading in oil, energy and commodity markets, then futures may well appeal. Having said that, you will still need a reasonable amount of capital and to be prepared to possibly narrow your focus to just one or two particular futures contracts.

For further guidance, including strategy and top tips, see our futures page.

Forex Markets

The popularity of trading the currency markets has grown significantly in recent years. It is now the largest market in the world. Decide to delve into the forex space and you will attempt to turn a profit from price fluctuations in exchange rates. You will buy and sell currencies when you believe they will move either higher or lower in relation to other currencies.

Currencies are always traded in pairs. But despite a number of options, only some posses the liquidity and other characteristics you need to generate intraday profits.

Key Considerations

There are several attractive features to day trading in the forex market:

  • Time – No need to worry about market opening hours, or trading when the market is closed, forex trading hours run 24/7. This makes it ideal for those looking to fit their trade activities around other commitments, or those who can only trade on the weekends.
  • Minimal investment – Whilst the stock market can require tens of thousands of dollars, you can get involved in the currency markets with as little as $100-$1000.
  • No commissions – With forex trading, you don’t normally pay a commission. Instead, brokers make their money through market trading quotes where you pay the spread.

However, currency markets do come with certain drawbacks:

  • Trading on market volatility – Plenty are lured in by the flexibility of forex trading. The problem is, to generate substantial profits you are often still restricted to periods of high volatility and volume. Although dependant on the pair, the best time to trade the GBP/USD and EUR/USD, for example, is between 03:00 and 12:00 EST.
  • Difficulty – It is a crowded marketplace with plenty of false market trading signals. Beginners are often recommended to stick to the GBP/USD or EUR/USD currency pairs. Both promise sufficient daily volume and price action.
  • Leverage – Due to price fluctuations in the forex market being small, many traders turn to leverage to maximise profits. Whilst this can indeed bolster takings, it can also amplify losses.

Today the forex market is the most accessible market. It promises low barriers to entry, trading outside of US market hours, plus minimal initial investment. You can also benefit from free strategies, technicals, blogs, forums, videos and reviews, by simply heading online.

For further guidance on day trading in the currency markets, see our forex page.

Cryptocurrency Markets

Day trading today’s market is very different from just a decade ago. There is now a number of markets for cryptocurrency traders. But whilst rules, regulations and thorough risks assessments are yet to be completed, the popularity of the cryptocurrency day trade is undoubtedly on the rise.

These internet alt-coins promise high levels of volatility, making them ideal for intraday traders. There was a time when bitcoins were traded for pennies on the dollar. Now, however, each coin is traded at thousands of dollars.

It isn’t just the bitcoin market that offers day traders opportunities for profit. You can also day trade in the following popular digital currencies:

Key Considerations

But with well-established markets, such as stocks, why should you start day trading in the cryptocurrency market?

  • Low cost – Whilst to trade on stocks can require thousands of dollars, you can get into the cryptocurrency markets with minimal capital. To start with, you can even get your hands on free bitcoin and litecoin. You also don’t have to pay to be a member of a platform, which can be the case with forex and futures markets.
  • Volatility – Cryptocurrency markets are developing a reputation for huge price swings. There are ample opportunities to generate profits. However, these fluctuations also mean an increased risk of large losses.
  • Accessibility – As market breadth increases, so does the software and equipment available for crypto day traders. Head online and you will find tutorial videos and a range of other educational resources to assist you. Also, you don’t need to worry about opening times or market holidays, you can day trade 24/7.
  • Exchange risk – There is currently no clear market risk definition. However, if your exchange goes bust you could lose all of your capital. Often deposits held on exchanges are uninsured.
  • Regulation – Whilst the world scrambles to regulate these emerging markets, there is a risk of falling victim to scam brokers. Not to mention unregulated markets can be manipulated with pumps and dumps, wash trading, plus spoofs.

If you are interested in technology and have an appetite for risk, then cryptocurrency markets may well be for you.

For guidance on charts, patterns, strategy, and brokers, see our cryptocurrency page.

Options Markets

Many platforms now offer trading in options markets. An option is a straightforward financial derivative. The contract gives you the right to buy or sell an asset during or within a pre-determined date (exercise date). As the seller, you have a legal obligation to meet the terms of the transaction. These will usually be to either sell or buy or if the buyer chooses to ‘exercise’ the option prior to the expiration date.

The advantage of options trading is that you do not have to own the underlying asset, which can often be far more expensive than a stock, for example.

Types

Despite having a reputation for being a risky instrument, there exist just two main classes of options:

  • Put – This sell option enables you to sell at a certain price.
  • Call – The buy option allows you to purchase at a particular price.

On top of that, there exist a long list of different capital, global, and emerging markets you can trade options in, although not all are appropriate for the day trade. These include:

  • Stock options
  • Index option
  • Mini options
  • Mini Index options
  • Options on futures
  • Weekly SPY options
  • OEX options
  • ETF options
  • S&P 500 options
  • Crude oil options

For further guidance on how to start day trading in the options market, see our options page.

Binary Options

Another interesting market comes in the form of binary options. Your job is to decide whether the underlying asset will finish above or below a particular price at a certain time.

These straightforward derivatives can now be traded on virtually any instrument or market. For example, you can trade binary options on commodity values, such as crude oil and aluminium. Alternatively, if you want to take a position on world-famous stocks, you can get binary options on Google, Tesla, and BP. Even forex markets and cryptocurrencies are on the binary options menu.

They appeal because they are an all or nothing trade. You know how much you will win or lose before you place the trade. So, if you want a straightforward market and instrument, plus access to global stocks with minimal capital, then binary options could be worth exploring.

For further information, including strategy, brokers, and top tips, see our binary options page.

CFD Markets

Despite being less well known in the list of trading markets, contracts for difference (CFDs) are an interesting proposition.

The straightforward definition – A CFD allows you to buy and sell on the rise and fall of a particular instrument. Where you entered and exited a trade is the actual contract for difference. This derivative based product is based on an underlying asset and your contract is with your broker.

But with so many domestic and foreign trading markets and financial instruments available, why do CFDs warrant your attention?

  • Diversity – There are over 10,000 instruments to choose from with CFD investing, including currencies and commodities. Plus, it’s a growing industry, meaning market diversity will increase.
  • Leverage – This could help you capitalise on opportunities, bolstering profits. However, there is also the risk of increased losses, so caution must be taken when using leverage.
  • Flexibility – CFDs often have no expiry date, premium, or commission (dependant on your broker). On the downside though, you will often pay a larger bid/ask spread than in the physical market.

For more information on how investing in the markets with CFDs works, see our CFD page.

Choosing A Day Trading Market

Day trading the markets for a living is no easy feat, despite direct access to many markets with just an internet connection. The problem is, market structure, quality and characteristics vary hugely. So, the market you choose must depend on your individual circumstances, from financial resources and appetite for risk to availability and market knowledge.

There are also a few important factors to consider when you’re deciding on a trading market. These are:

Volatility

Day trading a volatile market is essential. Volatility is a measure of how much price will vary over a given time. The more price fluctuates, the more opportunity there is for you to profit from intraday movements.

Liquidity

Liquidity is concerned with your ability to buy and sell an instrument without affecting price levels. Markets with high liquidity mean you can trade numerous times a day, with ease.

Market Resources

If you don’t have an in-depth understanding of your market, then you need to consider the availability of resources. Where will you be able to go for market updates and to gauge day trading market sentiment?

Is trading data easily accessible online? If not, it is worth exploring what your broker can offer, trading volume charts, for example, can often prove useful.

Also, does the market your interested in have an array of day trading market news sources you can turn to? Let’s say you’re interested in commodities, does your broker have a gold trading market news feed where important daily moves will be explained?

Narrow Your Focus

Another common mistake some individuals make is to try their hand at a number of different markets at the same time. Each market has their own nuances and complexities that require significant attention. So, you should focus on one market and master it. Then if you can generate consistent profits and you want to explore others markets, you can do.

So, don’t just start trading random overseas markets. A careful and calculated decision will often benefit you in the long run.

Demo Account

Whichever market you opt for, start day trading with a demo account first. This will enable you to get some invaluable practice before you put real capital on the line. You can get to grips with analytics, practice trading in bearish markets, choppy markets, and learn all the basics. It’s also an effective way to test drive a broker.

Algorithm Capabilities

You may also want to consider whether you will be able to employ automated algorithmic trading to increase market efficiency and capitalise on volatility. A constantly profitable strategy can often be programmed into an automated trading system.

These algorithms can be used for trading ranging markets, with market internals and capitalising on market cycles. You simply enter your parameters and then let your trading bot do the heavy lifting.

Final Word

Above some of the best day trading markets have been broken down. As you can see, today you have a wide range to choose from. This means if you cannot generate profits in one of these markets, you can always try another.

However, before you decide, consider your financial circumstances, market knowledge, availability, and your risk tolerance. This will help you decide which of the above markets you would be best suited to. Also, utilise the array of online market trading guides, resources and websites available. All may enhance your overall performance.

The Best Times of the Day to Buy and Sell Stocks

The Balance 2020 / Miguel Co

Sometimes less is more when it comes to day-trading. Devoting two to three hours a day is often better for most traders of stocks, stock index futures, and index-based exchange-traded funds (ETFs) than buying and selling stocks the entire day, for a couple of reasons.

Specific hours provide the greatest opportunity for day-trading, so trading only during these hours can help you maximize your efficiency. Trading all day takes up more time than necessary for very little additional reward. In many cases, even professional day traders tend to lose money outside of these ideal trading hours.

Avoiding Mental Fatigue

Additionally, day-trading requires discipline and focus, both of which are like muscles. Overwork them and the muscles give out. Trading only two to three hours a day keeps you on your game, and it likely won’t lead to the mental fatigue that can negatively affect your work. Trying to trade six or seven hours a day can drain you and make you more susceptible to mistakes.

Of course, everyone has different focus and discipline levels. Some traders might be able to buy and sell all day and do it well, but most do better by trading only during the few hours that are best for day-trading.

Trading at the Opening

Trading during the first one to two hours that the stock market is open on any day is all many traders need. The first hour tends to be the most volatile, providing the most opportunity. Although it sounds harsh, professional traders know that a lot of “dumb money” is flowing at this time.

Dumb money is the phenomenon of people making transactions based on what they read in the newspapers or saw on TV the night before. The information these people are acting upon is typically old news. Their trades can create sharp price movements in one direction. Then professional traders take advantage of the overly high or low price and push it back the other way.

New day traders are often told not to trade during the first 15 minutes of the day, and that might be good advice for very new traders, but the first 15 minutes typically offers the best opportunities for seasoned traders. This time period can provide the biggest trades of the day on the initial trends.

Ending by 11:30

Regular trading begins at 9:30 a.m. ET, so the hour ending at 10:30 a.m. ET is often the best trading time of the day. It offers the biggest moves in the shortest amount of time. If you want another hour of trading, you can extend your session to 11:30 a.m. ET.

A lot of professional day traders stop trading around 11:30 because that’s when volatility and volume tend to taper off. Trades take longer, and moves are smaller on lower volume—not a good combination for day-trading.

If you’re day-trading index futures such as the E-mini S&P 500 (ES) or an index-based ETF such as the SPDR S&P 500 (SPY), you can begin trading as early as 8:30 a.m. during premarket hours and begin tapering off at around 10:30 a.m. That provides a solid two hours of trading, usually with a lot of profit potential.

As with stocks, trading can continue up to 11:30 a.m. ET, but only if the market is still providing opportunities to capitalize on the trading strategies you’re using.

The Last Hour

Many day-traders also trade the last hour of the day, from 3 to 4 p.m. ET. By that time, traders have had a long break since the morning session, allowing them to regroup and regain their focus.

The last hour can be a lot like the first when you’re looking at common intraday stock market patterns. It’s full of bigger moves and sharp reversals. Like the first hour, many amateur traders jump in during the last hour, buying or selling based on what has happened so far that day. Dumb money is once again floating around, although not as much as it was in the morning. It’s ready to be scooped up by more experienced money managers and day traders.

The last several minutes of trading can be particularly active, with big moves on high volume.

The Best Days and Months

Keep the bigger picture in mind, too, beyond the hourly grind. Monday afternoon is usually a good time to buy because the market historically tends to drop at the beginning of the week, particularly around the middle of the month. Many experts recommend selling on Friday before that Monday dip occurs, particularly if that Friday is the first day of a new month or when it precedes a three-day weekend.

Likewise, prices tend to drop in September and then hike again a month later. October is generally positive overall, and prices often go up again in January, particularly for value and small-cap stocks.

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