If traders can learn about market hours and set appropriate goals, they will have a much better chance of making money on a reasonable schedule. The time of day has an effect on trading performance, but the extent to which it affects performance varies depending on a number of factors.
Let us look at some time factors that can influence your trading performance. At the end of this, we hope to fully answer the question, does the time of day affect your trading performance? Let’s jump into it.

Differences in Time Zones (Trading Sessions)

Because of the different trading sessions around the world, trading in a market that is based in a different time zone than you can have an impact on your trading performance. 

But it’s not only the trading time zone that matters. It’s also the execution time at which you execute your trades. Because all the major markets are more or less volatile it’s important to trade with the best execution speed brokers that ensure your trades get executed at the price you entered your trade. The fastest execution brokers like FP Markets or Forex.com have all execution times under 1 second.

When considering the different time zones, The Asia-Pacific session is the first one to reckon with. When liquidity recovers in the forex market at the start of the week, Asian markets are the first to see action. Unofficially, activity from this region is represented by the Tokyo capital markets, which operate from midnight to 6 a.m. Greenwich Mean Time (GMT). However, there are many other notable countries present during this time period, including China, Australia, New Zealand, and Russia. Given how dispersed these markets are, it stands to reason that the start and end of the Asian session are extended beyond the standard Tokyo hours. Asian hours are commonly thought to be between 11 p.m. and 8 a.m. GMT, accounting for activity in these various markets.

Just before the Asian trading hours end, the European session takes over in keeping the currency market active. This Forex time zone is densely packed with major financial markets. To date, London has had the honour of defining the parameters for the European session. This trading period is also extended due to the presence of other capital markets including Germany and France prior to the official opening in the United Kingdom, while the end of the session is pushed back as volatility persists until after the close. As a result, European hours are typically from 7 a.m. to 4 p.m. GMT. Because of increased trading activity during those hours, the Asian/European sessions sometimes overlap, resulting in increased volatility. This, consequently, leads to European and Asian currency pairs being the most volatile when compared to North American or Pacific currencies.

Due to the early activity in financial futures and commodity trading, as well as the concentration of economic releases, the North American hours begin at 12 noon GMT. With a significant gap between the close of US markets and the start of Asian trading, a stoppage in liquidity causes the North American session to end at 8 p.m. GMT.

As a result, if you are trading on the Tokyo Stock Exchange from the United States, you may need to adjust your sleep schedule to stay awake and alert during peak trading hours.

Market movements

The majority of stock traders profit from short-term price movements. The market is typically busiest at certain times of day, with morning and early afternoon being the busiest. This means that there may be more trading opportunities during these times, but there may also be more competition and volatility to contend with. Knowing when is the best time to buy stocks during the trading day can assist active traders in developing and executing a more successful trading strategy.

Prices change throughout the day in accordance with market sentiment. For example, traders may be more cautious in the morning hours as they assess the market’s direction for the day. In contrast, traders may be more confident and willing to take on larger risks in the afternoon, resulting in higher volatility.

News and events

Significant news or events can have a significant impact on the markets, and these events can occur at any time of day. If a major announcement or news story breaks during trading hours, stock prices can experience sudden spikes or drops that are difficult to predict or manage. For example, a positive earnings report may cause a stock’s price to rise, increasing investor demand almost as soon as the earnings press release is released. Negative news about a company’s approval can, on the other hand, prompt immediate selling as investors rush to unload that stock in order to limit their losses.

The currency market is especially vulnerable to short-term movements caused by the release of economic reports. There are several important considerations if you want to trade news successfully in the forex market. These can include knowing when reports are expected, understanding which releases are most important given current economic conditions, and, of course, knowing how to trade based on this market-moving data. 

Energy levels

Your ability to work is affected by your body’s energy levels. Physical and mental fatigue occur concurrently. Physical fatigue can eventually lead to mental fatigue. Sleep deprivation, especially when prolonged, can contribute to fatigue. Physical fatigue can make it difficult for a person to do the things they normally do. A person suffering from mental fatigue may find it difficult to concentrate and maintain focus.

Trading can be mentally and emotionally demanding, and different people may be more alert and focused at different times of the day. Some people, for example, are morning people who are most productive and focused early in the day, whereas others are night owls who perform best in the evening or at night. It would make sense for people to trade when they are most focused, whether day or night.

Final thoughts

The key is to be aware of these factors and to devise a trading strategy that incorporates them. This may entail adjusting your trading hours to coincide with peak market activity, scheduling breaks during times when your energy levels are typically lower or staying informed about news and events that may influence your trading decisions. You can improve your trading performance and increase your chances of success by doing so.