Understand trading hours across all markets. Master session-specific strategies and liquidity dynamics for accurate backtests.
US Equities (NYSE, NASDAQ):
• 9:30 AM – 4:00 PM Eastern Time (ET)
• Monday – Friday
• Closed: US federal holidays (Thanksgiving, Christmas, July 4th, etc.)
Extended Hours (Low Liquidity):
• Pre-market: 4:00 AM – 9:30 AM ET (very thin)
• After-hours: 4:00 PM – 8:00 PM ET (moderate volume, wide spreads)
| Session | Time (ET) | Liquidity | Spread |
|---|---|---|---|
| Pre-market | 4:00–9:30 AM | Very Low | 0.10–0.50% |
| Market Open | 9:30–10:30 AM | Very High | 0.01% (wide swings) |
| Midday | 10:30 AM–3:00 PM | High | 0.01–0.02% |
| Market Close | 3:00–4:00 PM | Very High | Volatile (rebalancing) |
| After-hours | 4:00–8:00 PM | Low | 0.05–0.30% |
🎯 Backtesting Tip:
Only backtest regular trading hours (9:30 AM–4:00 PM ET). Pre/after-hours are niche; unless you explicitly trade them, ignore them. Gap risk (overnight, weekend) should be modeled separately.
Forex markets operate 24 hours Monday-Friday (closed weekends). However, liquidity is NOT uniform—it follows regional trading sessions:
| Session | Time (UTC) | Time (EST) | Liquidity |
|---|---|---|---|
| Asia (Tokyo) | 21:00–6:00 (prev day UTC) | 4:00 PM–1:00 AM | Moderate |
| Europe (London) | 8:00–16:00 UTC | 3:00 AM–11:00 AM | Very High |
| NY Overlap | 13:00–17:00 UTC | 8:00 AM–12:00 PM | PEAK (widest spreads) |
| US (New York) | 13:00–22:00 UTC | 8:00 AM–5:00 PM | High |
| Sydney Close | 22:00–6:00 (UTC next day) | 5:00 PM–1:00 AM | Low |
🎯 Backtesting Tip:
If you scalp EUR/USD during London-NY overlap (peak liquidity), don't backtest 2am EST sessions. Match your backtest hours to your actual trading hours.
Crypto never closes, but liquidity and volatility follow US market hours:
• High Vol / Liquidity: 8:00 AM–5:00 PM EST (US stock market open)
• Low Vol / Liquidity: 5:00 PM–8:00 AM EST (US after-hours, Asia hours)
• Highest Vol Spikes: Fed announcements, macro data releases (2pm EST, 8:30am EST)
Common Crypto Trading Patterns:
• BTC volatility: ±3-7% during US hours, ±1-2% during Asia hours
• Leverage liquidations: Often cluster after US market close (sudden moves)
• Funding rates: Spike when overleveraged (8-hour resets can catch traders off-guard)
🎯 Backtesting Tip:
If you only trade crypto during US hours (realistic for most traders), don't backtest overnight gaps. Limit backtests to 8am-5pm EST to match your actual strategy.
Liquidity depends on active participants. When sessions overlap, spreads tighten; when they don't, spreads widen.
Examples:
• EUR/USD at 3:00 AM EST: Only Asia trading → spreads 0.005–0.01 pips (1:100 cost)
• EUR/USD at 9:00 AM EST: London+NY overlap → spreads 0.001–0.002 pips (1:500 cost)
• S&P 500 pre-market: Only ~5% of daily volume → spreads 10–50 cents (huge vs 0.01 at open)
Example 1 (Stock Day Trader):
• Trade only 9:30 AM–3:00 PM EST → Backtest only those hours. Ignore overnight/weekend gaps.
Example 2 (Swing Trader):
• Hold positions overnight → Include gaps, but separate pre-market slippage from RTH slippage.
Example 3 (Forex Scalper):
• Trade only London-NY overlap (3am-12pm EST) → Filter backtest to those hours.
Tight spreads: Peak liquidity hours (0.01–0.05%)
Wide spreads: Low liquidity hours (0.10–0.50%)
Many backtesting platforms allow session-based spread adjustments. Use them.
If your strategy works in high-liquidity hours, test it in low-liquidity hours too. If it breaks, it's not robust.
Example: A breakout strategy that works 9:30-10:30 AM might fail 4-5 PM when volume drops.
Only if you specifically want to. Most strategies are tested RTH (9:30-4pm). If you do trade extended hours, use tighter stops (lower liquidity = bigger slippage) and smaller position sizes.
For swing traders: include the gap in your backtest (Friday close → Monday open). Use your actual broker's slippage assumption (0.50–1.00% is reasonable). For day traders: ignore gaps entirely (you close positions).
Stocks: 9:30-11am (most volatility), 12-3pm (steady trends)
Forex: 8am-12pm EST (London-NY overlap, tightest spreads)
Crypto: 8am-5pm EST (peak volatility, best trends)
Trade when YOU'RE available and when the market has liquidity.