Optimal Futures Market Trading Hours - A Comprehensive Guide

Apr 22, 2024

Written by:
John McDowell

Futures markets are an integral part of the entire financial markets landscape. Their influence on stocks and commodities is undeniably important — so much so that futures can portend price movements in a myriad of important financial instruments all over the world. 

For that reason, there are important aspects of futures trading that aspiring traders should pay close attention to. One of those is liquidity, and the other is knowing when the optimal futures market trading hours take place.

After all, you wouldn’t want to get caught in a landslide sell-off during off-peak hours when liquidity is low.

Optimal trading hours can be a very subjective term. So, this comprehensive guide to the best trading hours for futures markets, will dispel some myths and highlight other important notes. 

Key Factors Influencing Optimal Futures Trading Hours

Generally speaking, three main factors influence futures trading at different times of day. 

  • Increased Liquidity: During “normal” hours for trading US markets, there is a higher volume of trades. This increase in volume typically results in higher liquidity, allowing traders to get into and out of larger positions more easily. Easier movement into and out of positions keeps you from impacting the price of a futures contract too much. It can also decrease the bid and ask spread, which may lower your transaction costs when trading high volume.

  • Volatility: As liquidity increases, volatility usually increases. This isn’t always the case, but it’s a pretty reliable heuristic. There may be times when a global event causes volatility in the absence of liquidity in off-peak hours. During these times, price fluctuations vary in intensity to less optimal trading times. While this can be desirable for some traders looking to make big profits from bigger price fluctuations, it can be a two-edged sword. However, experienced traders have a firm understanding of risk management when taking advantage of these moments.

  • Global Events: Most global events that affect markets are predictable or scheduled. For example, economic data releases and central bank announcements occur at set times during the trading day. These events can have a huge impact on futures prices, especially index futures. Optimal trading hours allow traders to capitalize on these events. Unforeseen events, like wars starting over the weekend or political/economic news overnight, can lead to unpredictable market swings as well. But these are outliers and hard to predict.

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Understanding Futures Market Volatility

Volatility can create both opportunities and challenges. While trading futures during times of high volatility we recommend actively monitoring positions, as markets can rapidly reverse. You’ll need to adapt your strategies to take advantage of this, all while managing your risk and minimizing losses. 

Here at TradingSim, we have a future trading simulator that allows you to experience these volatile market fluctuations in real-time, but without the real capital risk. Studying times of volatility in a simulator is always best.

The Significance of the Underlying Asset in Futures Trading

As with all trading vehicles, it’s the underlying asset that gives the contract or stock its value. For example, TSLA would just be a ticker symbol if it weren’t an actual electric car company. Futures are no different. Corn futures rely on the output and demand of corn. Gold futures rely on the price and demand of physical gold. And so on.

Futures can be based on an array of underlying assets from commodities, to cryptocurrencies like Bitcoin, to indices like the S&P 500. The contract price is heavily dependent on any news or price fluctuations of the underlying asset. For that reason, you’ll find that the S&P 500 typically trades similarly to its future contract price.

Considering Different Trading Strategies for Different Timeframes

When approaching the futures market, you have to decide whether you’re a day trader or a swing trader. As most of you know, a day trader is looking to profit from short-term strategies while swing traders hold for some days or weeks.

If you decide to day trade, you’ll want to focus on shorter timeframes and be active during the hours when the market is most liquid. For all intents and purposes, this is the normal hours of trading for the US markets: from 9:30 am until 4 pm. This may vary depending on the type of asset, which we will mention below, but it’s a good rule of thumb.

Personal Availability Is Crucial

When considering the strategies you’ll use, your ability to present in the markets is important. If you work a full-time job during the day, you may want to consider swing trading. As such, you’ll need a clear understanding of the market’s overall trend along with the assets you’re trading.

If you’re day trading, you’ll need to be present to actively monitor your trading, unless you set profit/stop orders that will take care of the position in your absence. Many trading platforms have this feature, including our own futures trading simulator here at TradingSim.

Breakdown of Futures Market Trading Hours by Asset Class

Futures markets have different trading hours than the stock market, and much of this is based on the asset class they represent.

Here are the trading hours for various futures contracts:

  • Metals and Energy Commodities:
    Gold, silver, crude oil, and natural gas futures typically trade from Sunday to Friday 6:00 p.m. to 5:00 p.m. CT
  • Agricultural Commodities:
    Wheat, corn, soybeans, and most other agricultural commodities trade between 7 p.m. and 7:45 a.m. CT from Sunday to Friday and from 8:30 a.m. to 1:20 p.m. CT Monday to Friday.
  • Equity Indices and Interest Rates:
    Equity index futures, like the NASDAQ, DJIA, or S&P 500, along with interest rate futures, such as the 10-year Treasury note, trade from Sunday to Friday, 6 p.m. to 5 p.m. CT.
  • Currencies and Cryptocurrencies:
    Forex futures based on currency pairs, as well as Bitcoin and other cryptocurrency futures, generally trade from Sunday to Friday, 6 p.m. to 5 p.m. CT.

Here is an example of the volume difference in certain trading hours for the NASDAQ Micro E-mini Futures (MNQ). This snapshot is taken from TradingSim's virtual simulator. Take notice of the huge difference in liquidity during off-peak hours and the consistency with which volume peaks and troughs.

Disclaimer: These hours are subject to change and can vary depending on holidays or other factors. Your best bet is to check with a specific exchange or broker for up-to-date info on trading hours for the contracts you want to trade.

General Trading Hours for Major Commodity Exchanges

The two major commodity exchanges are known as the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE). They each have their general trading hours.

The CME Group: CME operates almost 24 hours per day from Sunday to Friday. For most products like agricultural contracts, the open outcry trading hours run from 8:30 a.m. to 1:20 p.m. CT. However, electronic trading runs almost 24 hours from Sunday to Friday with a break from 9 p.m. to 10 p.m. CT.

The Intercontinental Exchange: ICE also operates close to 24 hours per day, Sunday to Friday. The specific trading hours vary, as we mentioned above, with some of these markets breaking between 9 p.m. and 10 p.m. E.T. 

The goal of both exchanges is to accommodate global participants into the market and provide continuous trading opportunities for the various commodities.

Global Market Overlap

Major financial trading hubs like London, Hong Kong, and Tokyo can play a significant role in the optimal trading time for futures markets. These hubs can extend trading opportunities and increase volatility in what would be considered extended hours for American markets.

As one global market’s closing time overlaps another market’s open time, you may experience spikes in trading volume, providing you with opportunities for liquidity and market movements. Generally speaking, it’s good to be aware of when these global markets open and close depending on your strategies and trading availability.

The Impact of Institutions on Futures Trading

Institutions can also play a huge role in optimal trading times. That's because they are the biggest players in the market. When they start buying and selling, the needle starts to move. Ideally, you'll want to be aware of when these institutions are transacting in the markets, as it can influence your strategies.

Here are some institutions to be aware of when futures trading:

  • Hedge Funds and Investment Banks: With billions of dollars at their disposal, these guys hold huge positions in futures contracts. Their purchasing power influences market prices significantly throughout the trading day. This is a good thing because it increases market liquidity, allowing you to enter and exit trades with ease. On the flip side, they may cause an increase in volatility, especially if many institutions are acting in unison.

  • Producers and Consumers: The corporations that own the underlying assets being traded have a vested interest in their products. For that reason, many of these billion-dollar agriculture and mining corporations will hedge against falling prices by trading futures. Sometimes this may have the effect of counterbalancing positions, which arguably leads to a more efficient market.

  • The Exchanges: As we discussed previously, the CME Group, ICE, and other exchanges own the medium by which futures are traded. For that reason, they set trading rules, margin requirements, and a host of other criteria, like managing the clearing process. This ensures a smooth transaction process in the markets that is fair and transparent. 

  • Regulatory Bodies (SEC, CFTC): These agencies protect market participants from unfair trading practices in order to promote investor confidence. Their rules and regulations ensure that markets are orderly and that excessive speculation is kept under control. They are like the police, or oversight committee, which makes sure the little guys aren't getting taken to the cleaners because of foul play.

  • The Federal Reserve: The Fed isn't directly involved in futures trading, but its monetary policy decisions on interest rates can impact the futures market significantly. Just an announcement from the chair can set off a cascade of changes in currencies and other assets based on economic or inflationary influences.

While all these institutions have their own agendas, it's the interplay between all of them that can affect the markets at different times. It's important to understand their roles to navigate the complex world of futures markets. 

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8 Ways to Optimize Your Futures Trading Hours

There’s a lot that goes into trading futures at the right time. It’s serious business for many professional traders and institutions. It requires knowledge of time zones, trading hours, and specific strategies you can use to exploit the markets during these times. 

Let’s discuss eight ways you can optimize your time trading in futures contracts.

  1. Know the trading hours
    This one seems a little redundant by now, but it’s true. If you don’t have a basic knowledge of when an asset trades on a certain exchange, you’re missing the boat. For example, commodities like gold and oil or soybeans and corn trade at different times from equity indices.

  2. Leverage global market overlap:
    Pay attention to the open and closing of major financial market hubs across the globe. The U.S., Europe, and Asia can lead to opportunities or losses if you’re not prepared for when their sessions begin and end.

  3. Be aware of market sessions: The overlap of the U.S. and European stock market sessions usually occurs between 9 a.m. and 10:30 a.m. Liquidity picks up during these times, then again around 1 p.m. when institutions return for the afternoon session.

  4. Plan and adjust your trading schedule: When picking a strategy, always consider your personal availability. We don’t recommend trading while you’re distracted at work. Find time to day trade, or learn to swing trade in your spare time. When possible, adjust your schedule around the more liquid times during the day.

  5. Choose the right strategy: Pick a strategy that works well during your specific trading times. If day trading you may benefit from scalping strategies. If swing trading, you might benefit from intermediate-term trend-following strategies. Either way, try not to overlap and keep your strategies specific.

  6. Backtest your strategies: Obviously, we’re big proponents of testing the markets without risking real capital. The great news is that TradingSim offers a platform that allows you to do just that — experience futures trading 24 hours a day, 7 days a week. Utilize this tool frequently, especially when starting out, and apply your knowledge and strategies with realistic market data.

  7. Monitor economic and financial news: Futures are impacted by news and forecasts just as much as stocks are. Stay abreast of economic news that could influence the underlying asset you’re trading. You never know when a storm in India will affect a commodity's price.

  8. Practice risk management: This is the #1 rule in all of trading. No matter what you trade, you have to implement risk management if you’re going to make it in this industry. Always obey your stop losses and have a plan when things don’t go your way.

Key Takeaways

Hopefully, you have a good understanding of the importance of optimizing the times you trade futures. As we’ve mentioned before, be sure to know the best times for trading each asset you’re interested in and the periods of heightened volatility and liquidity. 

Additionally, it’s important to stay aware of global markets and their impact on trading hours—news, your availability, and specific strategies round out the discussion on knowing when to trade futures. 

If you’re looking for a safe place to try out futures trading and study the best times to trade, there is no better place than here at TradingSim. Our futures simulation platform has helped thousands of aspiring traders over many years. 

With our 7-day free trial, there’s no risk!

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Tags: Day Trading, Day Trading Futures Strategies

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