One of the rules avid traders recognize is that time in the market =
risk. Of course, the objective is to make the most profits in the
shortest amount of time, minimizing the time active positions remain in
the market unless profit objectives are being met. Volatility is a
trader's friend.
Many traders adore the Euro/USD futures contracts (6E or EC ticker
root symbols). They're fast, volatile, and can generate big returns (or
losses) in a matter of minutes.
Newer traders are lured by availability – Euro/USD futures can be
traded round the clock, 23 hours a day, 5 weekdays a week, and Sunday
nights. But, that doesn't mean they should be traded round the clock.
Like any instrument, 6E has its high and low volatility periods.
Trading 6E during low volatility periods can be an exercise in
frustration, with frequent stopouts or wider than comfortable stops,
only to see profit targets ultimately hit.
Recognizing 6E's 24 hour footprint is useful in picking the best
times to trade this unruly beast. The attached chart averages the past
year of hourly 6E pip ranges. Average hourly ranges are based on the
difference between the highs and the lows of each hour in the 2009
trading year.
When we trade 6E, we want to see motion, in a trending market, that
gives us the best opportunities for hitting our profit targets, quickly.
News events can cause large 6E price spikes any time of day, but the
averages are interesting. Certain times of day are 2-3 times more
likely to offer movement than others.
To that end, three times emerge throughout the day as some of the best times we like to trade 6E.
* 2:00-3:00AM Eastern, as London and Europe sessions open
* 9:00-11:00AM Eastern, as the NY session opens and reacts to USD moves
* to a lesser extent, 7:00-8:00PM Eastern, as Asian markets open
Lately, 6E has had a tendency to remain dormant during many
afternoons, resulting in price action that does not always justify the
risk:reward for new positions after lunchtime in the US. Might as well
book profits, protect swing trades in the morning, then take the
afternoon off.
Recognizing the times of day that 6E is most likely to yield liquid,
volatile ranges that present trading opportunities can help traders
structure their trading days, minimize risk, and reduce unproductive
time in the market.
