Jun 12, 2024
Written by:
John McDowell
Futures markets are mostly open 24 hours, six days a week from Sunday to Friday. This means that buyers and sellers can trade the market at any time of the day or night. But the freedom to trade the markets at any time can be dangerous as market conditions at the time of your trade might turn unfavorable and rob you of your money. You might have a well-devised trading strategy, but it may not yield the desired results if you enter the market at the wrong time.
Each futures exchange determines its own trading hours, with separate opening and closing times for different categories of assets. Some of the world’s largest and most popular futures exchanges are the Chicago Mercantile Exchange (CME), Intercontinental Exchange (ICE), Eurex, and Chicago Board Options Exchange (CBOE).
Expert traders are mindful of the market’s dynamics, such as optimal trading hours, high-volatility hours, quiet hours, and market session start and end times. In other words, they don’t trade markets willy nilly. Instead, they carry out each of their trades meticulously, backed by data – a trait that sets apart an expert trader from a rookie trader.
In this article, we reveal the vital, high-volume trading hours for different futures markets, which will help you determine whether to trade or to wait till the right time to remain profitable in the market for the long term.
The trading hours for the well-known equity indices, SP 500, Nasdaq 100, Dow Jones, and Russell 2000 on the CME Globex exchange are from 6:00 p.m. to 5:00 p.m. (ET), Sunday to Friday. However, high volumes mostly occur during the U.S. stock market's opening (9:30 a.m. EST) and closing (04:00 p.m. EST).
Another important period often associated with high trading volume is the overlap between European and U.S. markets, which occurs approximately between 8:00 a.m. and 11:30 a.m. EST. This is the period when most European traders close their positions for the day, resulting in high trading volume liquidity during the period.
For a visual aid, take a look at the following SP 500 futures chart with these timeframes. Take notice of the volume at the bottom of the chart to see how the time corresponds with elevated trading activity.
Energy futures exchanges offer contracts for crude oil, natural gas, gasoline, heating oil, coal, etc., with the crude oil and natural gas contracts being the most traded.
The crude prices are volatile, swayed by geopolitical events, OPEC’s interventions in the market, and the global energy demand. But the natural gas futures contracts are also highly liquid, which makes them apt for trading during most times. The crude oil and natural gas futures on the CME Globex exchange are open for around 23 hours, from 06:00 p.m. until 05:00 p.m. Sunday to Friday.
The market’s high-volume trading hours are usually between the U.S. market opening time ( 09:00 a.m. EST) and the European market closing time (11:30 a.m. EST). Further, any significant data released during trading hours can also swing the market. For example, the U.S. Energy Information Administration (EIA) releases a weekly Petroleum Status Report each Wednesday at 10:30 a.m. ET on domestic and abroad U.S. crude oil inventories. The report holds significance and can result in big market moves, which present traders with numerous trading opportunities.
Here is a good look at the volume on a Crude Oil futures chart inside TradingSim. Compared to the indices, you can see more liquidity in the early morning and afternoon hours, though regular stock market hours remain the most traded:
The highly-traded agricultural futures include soybeans, corn, sugar, wheat, and coffee, among others. Different commodity exchanges have different trading hours for trading agricultural futures. For example, wheat futures on the CME Globex Exchange are traded in the evening/morning session from 7:00 p.m. C.T. to 7:45 a.m. C.T., Sunday to Friday. The day sessions last from 8:30 a.m. to 1:20 p.m. CT, Monday to Friday.
Agricultural futures experience high volatility and trading volume after important data releases such as crop progress reports, weather forecasts, production reports, etc. These reports provide vital information about the crop supply and possibly the outlook of the prices.
Changes in demand, substitute uses of the product, changes in production technology, previous seasons’ production and commodity prices, government subsidies, supply disruptions arising from weather, and other factors affecting supply or demand will be reflected on the futures market.
Here is a snapshot of soy bean futures. Notice the difference between the high volume trading hours here versus energy mentioned above:
The highly-traded metal futures include gold, silver, copper, platinum, and palladium. On the CME Globex Exchange, metals futures contracts like gold trade Sunday to Friday from 05:00 p.m. to 04:00 p.m. Since metals are regarded as safe havens, they experience high trading volume during downturns in the equity markets.
Usually, high trading volume in metals futures coincides with the opening hours of the major stock exchanges. Important U.S economic data is released at around 08:30 a.m. EST every day, which also spikes the trading volume in the equity futures.
The Forex market is one of the largest markets in the world in terms of trading volume, with daily transactions reaching several billion dollars. Unlike the forex market where trading takes place over the counter (OTC market), the forex futures are traded on organized exchanges. The Chicago Mercantile Exchange (CME) is the largest currency futures exchange that handles an average daily volume of millions of currency futures contracts.
The trading hours of forex futures contracts on the CME are Sunday to Friday from 05:00 p.m. to 04:00 p.m. CT, with a one-hour break starting at 04:00 p.m. CT.
Since futures contracts are derivatives contracts that derive their value from the underlying currency fluctuations on the forex market, traders need to be aware of what is happening in the OTC forex market. This includes knowing the three peak sessions in the market – the Asian or Tokyo session, the European or London session, and the North American or New York session. Trading volume is elevated and the market usually makes significant moves during these periods.
Traders mostly prefer trading during the overlap of the European and North American sessions between 08:00 a.m. and 12:00 p.m. EST, as the period is marked by high trading volume.
Also of particular importance are the economic announcements from the U.S., the U.K., and the European Union, major central bank’s interest rate decisions, industrial output data, unemployment data, inflation readings, etc. The data release has the potential to move different currency pairs and result in increased volatility and volume in the OTC as well as futures market.
Here's a quick glance at rising volume during forex market trading hours:
Various types of interest rate futures are available on different exchanges around the world. On the CME Globex exchange, traders can trade credit index futures, U.S. T-bills, and Swap futures, among others. Most interest rate futures are open for trading Sunday to Friday between 6:00 p.m. to 5:00 p.m. ET.
Interest rate futures react to the Central Bank’s interest rate announcements and economic data releases. So, you can expect elevated trading activity in interest rate futures during those events. If you want to trade the interest rate futures, you should try to do so during the period of regular bond market hours, which is from 08:00 a.m. to 05:00 p.m. ET.
Trading volume in markets varies consistently. At times the trading activity would be subdued while all of a sudden you might experience a wave of orders and an increase in volatility. However, traditionally, markets do have high trading activity during certain periods, which are favorable for finding trading opportunities. If you still want to trade outside of those traditional high-volume sessions, you can use various volume-tracking indicators to compare the current volume with the transaction volume in previous periods.
Trading during heightened buying and selling activity in the market offers many benefits for traders. Here are our top three:
1. Reduced Slippage: When the trading volume is high, the bid-ask spread is usually low and trades get executed quickly without slippage due to high liquidity and low volatility. This results in reduced transaction costs for both buyers and sellers.
2. Quick Trade Execution: During high trading activity in the market, traders can get in and out of the trade quickly at their desired prices because of ample liquidity and the presence of a large number of buyers and sellers in the market. The high liquidity scenario is conducive to executing a range of trading strategies such as scalping or day trading.
3. Improved Trading Performance: When you trade during high volume periods, you save yourself from wrongly opening trades during low liquidity times. The market might be range-bound or there might be too much noise in the market to trade outside of traditional high-volume trading hours. When you know the typical high-liquidity and high-activity trading hours, you don’t have to wait all day long to spot a profitable setup. You can simply observe the market during peak hours and trade if you find a profitable opportunity.
Several factors give rise to high liquidity and a surge in trading volume. And whenever any of these factors come into play, the trading volume would invariably grow. This means that aside from the periods traditionally associated with high trading activity, a trader should focus on those market-moving factors and keep abreast of the developments in the market to make the most of resultant potential market moves.
Market events such as vital report releases or significant market-moving news give rise to increased volume and high liquidity in the market. Most of these reports are released on specific dates, so you can trade the market accordingly as soon as they are available.
Experienced traders keep an eye on the economic calendar that lists the dates for the release of key economic data, which helps them understand the markets and make correct trading decisions. Central bank interest rate announcements, inflation figures, unemployment rates, industrial output levels, etc are some of the key economic data that have an immediate influence on the stock, currency, and commodity markets.
Global geopolitical developments, such as war, elections, tariffs, and trade negotiations can have a varying degree of influence on the markets. For example, the Ukraine war caused significant changes in the commodity markets, in particular the crude oil and natural gas market. Similarly, instability and war in the Middle East region, which is home to huge oil reserves, also have an immediate impact on crude oil markets as traders fear supply disruptions.
Important pieces of news can build the collective sentiment of the market and sway the market up or down on any day. That’s why it’s important to be informed about the financial as well as other geopolitical news if you want to improve your trading performance.
Some commodities experience high seasonal demand due to which you can expect the trading volume to jump during those periods. For example, the consumption of natural gas grows in winter before switching back to normal in summer.
Similarly, the supply and demand of some agricultural commodities changes during planting and harvest seasons. As a commodity trader, you need to be aware of the underlying factors that influence the commodity’s supply and demand. The demand and supply disturbances are ultimately reflected in prices.
Traders follow price movements closely by using different types of technical indicators and price charts to understand the trend and determine key support and resistance price levels. For example, if you are trading stock futures, you need to analyze the price action of the price stock to pinpoint your entry and exit points. Since most of the time the price action of the futures contracts mirror the price movement of the underlying asset, you can apply technical analysis tools on either the stock price itself or the stock’s futures contract price chart.
In the absence of any catalysts that can move the market, prices mostly remain range-bound. That’s when technical analysis can prove even more beneficial as the price action respects support, resistance, and other technical levels highlighted by technical indicators.
Knowing the typical high-volume trading hours for the market you want to trade can significantly improve your trading. When the market has a large number of participants, the liquidity is abundant, allowing traders to get plenty of opportunities and execute their strategies quickly.
It is also easier to trade the trends during such periods as the market usually takes a clear direction when participants and liquidity are high. Although trading opportunities do exist outside of these conventional high-volume trading hours, these are relatively few as the market is mostly choppy due to a lesser number of buyers and sellers.
If you want to make the most of high-volume trading hours, you need to get the basics right. Tradingsim offers the most realistic trading simulator for futures. In the sim, you can adopt risk management strategies, find your entry and exit points before entering the trade, and develop your scalping strategies.
Remember, each of your trades should be backed up by data. Incorporating our futures simulation platform can help you a great deal in taking your trading to the next level as it would help you clear out the noise and false signals from the market.
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Tags: Futures
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