Market conditions and costs

Sessions and liquidity

Activity, volatility and spreads follow the clock.

Well documented

Found repeatedly in peer-reviewed work or regulator data.

Documented in interdealer data. A retail study of outcomes by hour was not found.

What it is

In the interbank market, volume and volatility rise together over the day and the bid-ask spread moves the other way, so spreads are tightest when activity is highest.

What it suggests

A plan can name the hours it trades. Whether those hours suit a strategy is a fact about the strategy.

How to check it

Record the session of each trade and let the Exchange show results by hour.

Common mistakes

Trading thin hours with a stop sized for busy ones.

Sources

Ito and Hashimoto (2006), Intraday seasonality in activities of the foreign exchange markets: evidence from the electronic broking system, Journal of the Japanese and International Economies 20(4) (citation and headline finding only)

Related lessons

Written in our own words. Education only, not financial advice.