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Monday, January 30, 2012

Trading Thoughts - Time to Trade

When is the best time to trade futures?  Futures trade nearly 24 hours a day for most of the week.  As someone who works full time, it is tempting to believe that I could try to trade futures live either before the work day begins or after it is over.  The question is one of liquidity.  I have not yet examined the around-the-clock volumes of all the futures contracts.  In fact, I am not sure what kind of volume is required for a one-contract trader to experience reasonable spreads.  Would it be good to use a criteria of 15 contracts a minute, 10 contracts for a range 4 chart, or trade using a 30 tick chart?  

I am not really sure how to answer that question and what setting would be optimal to reduce slippage and establish minimum volume requirements for good liquidity.  I have read in some forums that trading most contract between 7am (eastern) to 4pm (eastern) provides enough liquidity, and this seems to be clear when viewing the charts during those hours.  Although, there appears to be an uptick in contract volume beginning around 2am (eastern) which probably corresponds to the European markets opening.  I do not know how to gauge if there is enough volume during the early morning hours to justify trading.  Additionally, I think it would be better to avoid scalping small trades during the off-peak hours, and look to trade larger ranges.

Besides regular, live trading experience, how do you determine if there is enough liquidity present to support your money management system?

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