/ES Futures Probability at Time (Market Timing, differently)

[mashume]

Market Timing -- No, not that kind

Introduction

Looking for patterns. It is human nature, and it is what drives those of us who engage in technical analysis to look for 'better' indicators -- indicators which are more accurate or timely in identifying patterns in the movement of a security that will have an outcome that is more likely positive for our accounts than not.

We do not always succeed in our predictions, and no system is likely to ever "bat 1000" (since baseball season is upon us). We struggle to make sure that our stop losses prevent run-away downside and that our risk return allows us to remain profitable even if our trades are no better than a 50-50 guess.

What follows is an investigation I've thrown together on a slow Friday afternoon. It is not investment advice, and it is not authoritative. It relies on a short window of time in which the market has made nearly unimaginable gains. It may be misconstrued to promote one style of trading over another -- it should not. It is, however, an interesting (to my brain) look at the movements of the market.

Time and Probability
So, when we look for better entries and exits, we look at multiple time frames, multiple indicators, strengths, trends, stochastics, and a host of others trying to decide what the probability of a good outcome for the trade is going to be.

As I was sitting looking at my trade going nowhere fast last Wednesday or Thursday, having watched a trade Sunday go through the roof, I wondered if there was any pattern to discern in what time of day I entered a trade. So I fired up a jupyter notebook (python) and dug into some data provided via yfinance, a drop in replacement for yahoo finance's API.

What follows are the rather surprising findings from that investigation.

Why ES Futures

I trade these, so I chose to examine them. They trade nearly around the clock, from Sunday to Friday. If you're not into trading ES futures, the same analysis might be applicable to other securities, but I haven't really tried. The ES futures do represent a broad swath of the market after all.

Hold Time

Rather than focusing on when to exit (highs, lows, averages, any of that) I decided to look at what would happen if I entered a trade at a given time, and held the position for a set number of minutes. This is easily accomplished in a program and eliminates bias based on the indicator (set of indicators) chosen for trading.

I opted to make calculations for the following hold times:

• 30 minutes (1/2 hour)
• 60 minutes (1 hour)
• 120 minutes (2 hours)
• 180 minutes (3 hours)
• 240 minutes (4 hours)
• 360 minutes (6 hours)
• 720 minutes (12 hours)
• 1440 minutes (24 hours)

I then broke these into short, medium, and long hold times:
Short:

• 30 minutes (1/2 hour)
• 60 minutes (1 hour)
• 120 minutes (2 hours)

Medium:

• 120 minutes (2 hours)
• 180 minutes (3 hours)
• 240 minutes (4 hours)
• 360 minutes (6 hours)

Long:

• 360 minutes (6 hours)
• 720 minutes (12 hours)
• 1440 minutes (24 hours)

Profit / Loss per trade was calculated by finding the close price t minutes later and finding the difference between close prices at the open and close of the trade.

This was done on 5 minute data, and then aggregated by hour of the day, and separately by day of the week. The data are presented as box plots.

Graphs
For time of day graphs, hours are integer values as East Cost (New York) Time.

Returns aggregated by time of day, all hold lengths

Returns aggregated by time of day, short hold lengths

Returns aggregated by time of day, medium hold lengths

Returns aggregated by time of day, long hold lengths

for all day of week graphs, 0 is Monday, 1 is Tuesday... 6 is Sunday.

Returns aggregated by day of week, all hold lengths

Returns aggregated by day of week, short hold lengths

Returns aggregated by day of week, medium hold lengths

Returns aggregated by day of week, long hold lengths

Results of all holds separated by length of hold

Conclusions
There is a lot here to digest. What is most notable is that, from the hourly charts, there is a tremendous decrease in volatility during the trading day, and a matching decrease in average profit. Perhaps the 'sure thing' is not the lucrative thing... that makes some sense.

I think that from this briefest investigation, I will not worry about trades on certain days or at certain times of day and rather focus my efforts on finding entries at times which have higher historical probability for being profitable, if not lucrative. Perhaps I will size my orders and risk accordingly -- along with my expectation of normal market movements.

I have drawn my own conclusions from what is presented here, and offer it to you for your own, and to start a discussion. If you have questions, please ask. I enjoy the dialog about this kind of thing as much as anything.

Post Script
This is all run on 60 days of data at 5 minute intervals. If anyone has access to 24 hour 1 minute data going back a year or more, and wants to share, I'll be happy to run my analysis and post it back here. I'm sure I could tease it out of ToS, but I really don't like programming OAuth protocols for API access.

Happy Trading,
Mashume

 

[yusef]

Absolutly agree with you! Times regule oportunities. (J. Dalton)

 

[bobomatic]

I'm not a stats guy but can appreciate your effort here. I have no empirical evidence except 30+ years of trading futures, but the "timing" method for me is simply stop trading after 11 CST. IMO, the order imbalance at the opening offers more profitability then any other time.

To prevent giving any profit back, I stop trading after 11 when the chop begins to kick in. I had to develop the discipline to do this. And the only way that I could stop giving my profits back was to stop while I was ahead. I try to stay humble with the markets, so I'm not being cocky or arrogant, when I say I can't remember my last losing day. I have them, but not often. I might, on the very rare occasion, take advantage of volatility in the last hour of trading or on those days where breaking news moves the markets drastically, but those are the exceptions. Even then, I really don't like doing it no matter how tasty the trade. It's my iron clad, written in stone rule that makes me a very good living. Having said all of that, what works for me may not work for others but it's food for thought for those like to read about a different perspective. Thanks for your post. GLTA.

 

[Eddie]

I'm not a stats guy but can appreciate your effort here. I have no empirical evidence except 30+ years of trading futures, but the "timing" method for me is simply stop trading after 11 CST. IMO, the order imbalance at the opening offers more profitability then any other time.

To prevent giving any profit back, I stop trading after 11 when the chop begins to kick in. I had to develop the discipline to do this. And the only way that I could stop giving my profits back was to stop while I was ahead. I try to stay humble with the markets, so I'm not being cocky or arrogant, when I say I can't remember my last losing day. I have them, but not often. I might, on the very rare occasion, take advantage of volatility in the last hour of trading or on those days where breaking news moves the markets drastically, but those are the exceptions. Even then, I really don't like doing it no matter how tasty the trade. It's my iron clad, written in stone rule that makes me a very good living. Having said all of that, what works for me may not work for others but it's food for thought for those like to read about a different perspective. Thanks for your post. GLTA.

Hi, I am trading futures as well (/NQ) and see that after 10:30 (EST) chop starts. Can you share please your strategy for futures trading (what you looking for entries, your time frame, etc...) would really appreciate. It took me a while to realize best day trading time, now i am trying to put together strategy. Thank you

 

[scott69]

Interesting discussion. Over the last several months, I've been doing a time study of the most "trade-able" times for the /NQ. Granted, it is subjective, in that it is times when I seen price trending with momentum, i.e. times when I can get into a trade and expect a high level of success. Interesting that others have found the same times profitable. I also did it because I am retired and only trade for amusement, something to do in winter months. The time study comes in handy because now that the weather is getting nicer, I really don't want / need to trade all day, especially during the summer doldrums.

So the times that I found easiest to trade are (half hour increments, all time in Central Time) 1) 9 - 9:30, 2) 9:30 - 10, 3) 12:30 - 1, 4) 12 - 12:30, 5) 10:30 - 11, 6) 2 - 2:30, 7) 2:30 - 3 (cash close)

This is a very subjective study and could further be broken down into day of the week, month, season, etc. but the results have, surprisingly been consistent even throughout those periods.

 

[bobomatic]

Hi, I am trading futures as well (/NQ) and see that after 10:30 (EST) chop starts. Can you share please your strategy for futures trading (what you looking for entries, your time frame, etc...) would really appreciate. It took me a while to realize best day trading time, now i am trying to put together strategy. Thank you

I have a 2 chart grid setup. A 5 minute candle chart on the left and a 25 tick range bar chart on the right. (I occasionally adjust the tick range). I use the same indicators on both charts... my own customized version of the stock PPS in TOS along with Bressert double stochastic which I find to be a phenomenally accurate indicator. Here:

https://usethinkscript.com/threads/looking-for-the-dss-bressert-for-tos.644/#post-24726

I use the range bars with PPS and Bressert to cross confirm the signals I get on the 5 minute chart. The first 5 minutes to an hour after the open on the RTY, NQ or YM has been my bread and butter.

But I have to say, even though this technical setup works extremely well for me, I don't know how well it would work for others... the real measure of success is drawing on personal experience gained over the years with what's between the ears... and the way you interpret and ultimately pull the trigger using the guidance of your indicators.

 

[Eddie]

I have a 2 chart grid setup. A 5 minute candle chart on the left and a 25 tick range bar chart on the right. (I occasionally adjust the tick range). I use the same indicators on both charts... my own customized version of the stock PPS in TOS along with Bressert double stochastic which I find to be a phenomenally accurate indicator. Here:

https://usethinkscript.com/threads/looking-for-the-dss-bressert-for-tos.644/#post-24726

I use the range bars with PPS and Bressert to cross confirm the signals I get on the 5 minute chart. The first 5 minutes to an hour after the open on the RTY, NQ or YM has been my bread and butter.

But I have to say, even though this technical setup works extremely well for me, I don't know how well it would work for others... the real measure of success is drawing on personal experience gained over the years with what's between the ears... and the way you interpret and ultimately pull the trigger using the guidance of your indicators.

Thank you for replying back.....

 

[tomsey]

I have a 2 chart grid setup. A 5 minute candle chart on the left and a 25 tick range bar chart on the right. (I occasionally adjust the tick range). I use the same indicators on both charts... my own customized version of the stock PPS in TOS along with Bressert double stochastic which I find to be a phenomenally accurate indicator. Here:

https://usethinkscript.com/threads/looking-for-the-dss-bressert-for-tos.644/#post-24726

I use the range bars with PPS and Bressert to cross confirm the signals I get on the 5 minute chart. The first 5 minutes to an hour after the open on the RTY, NQ or YM has been my bread and butter.

But I have to say, even though this technical setup works extremely well for me, I don't know how well it would work for others... the real measure of success is drawing on personal experience gained over the years with what's between the ears... and the way you interpret and ultimately pull the trigger using the guidance of your indicators.

Hi Bobomatic,

I love the simplicity of your 2-chart setup that you described.... 'cause sometimes I can get myself really bogged-down by too many indicators...

If you're using TOS, is there any chance you would share your chart-setup with me via the "Share" function within TOS, and then I can manually enter the URL address into my TOS platform?

Thanks again for sharing you input.....

 

[ssmike123]

I have a 2 chart grid setup. A 5 minute candle chart on the left and a 25 tick range bar chart on the right. (I occasionally adjust the tick range). I use the same indicators on both charts... my own customized version of the stock PPS in TOS along with Bressert double stochastic which I find to be a phenomenally accurate indicator. Here:

https://usethinkscript.com/threads/looking-for-the-dss-bressert-for-tos.644/#post-24726

I use the range bars with PPS and Bressert to cross confirm the signals I get on the 5 minute chart. The first 5 minutes to an hour after the open on the RTY, NQ or YM has been my bread and butter.

But I have to say, even though this technical setup works extremely well for me, I don't know how well it would work for others... the real measure of success is drawing on personal experience gained over the years with what's between the ears... and the way you interpret and ultimately pull the trigger using the guidance of your indicators.

Bob, please can you post one of your chart. Used Bressert's Double Stochastics about 20 years ago. He lived in Mexico at that time. Please share how you use this on 2 charts.

 

[MLlalala]

I'm not a stats guy but can appreciate your effort here. I have no empirical evidence except 30+ years of trading futures, but the "timing" method for me is simply stop trading after 11 CST. IMO, the order imbalance at the opening offers more profitability then any other time.

To prevent giving any profit back, I stop trading after 11 when the chop begins to kick in. I had to develop the discipline to do this. And the only way that I could stop giving my profits back was to stop while I was ahead. I try to stay humble with the markets, so I'm not being cocky or arrogant, when I say I can't remember my last losing day. I have them, but not often. I might, on the very rare occasion, take advantage of volatility in the last hour of trading or on those days where breaking news moves the markets drastically, but those are the exceptions. Even then, I really don't like doing it no matter how tasty the trade. It's my iron clad, written in stone rule that makes me a very good living. Having said all of that, what works for me may not work for others but it's food for thought for those like to read about a different perspective. Thanks for your post. GLTA.

So you only trade morning sessions, i agree the mid day is choppy, but what about afternoon, may i know the reason you don't trade afternoon?

 

[MerryDay]

So you only trade morning sessions, i agree the mid day is choppy, but what about afternoon, may i know the reason you don't trade afternoon?

Did you know that clicking on a member's name will allow you to see when a member was last seen on the uTS forum? @bobomatic has not been seen in a while.

 

[Trader Raider]

So you only trade morning sessions, i agree the mid day is choppy, but what about afternoon, may i know the reason you don't trade afternoon?

A lot of us don't trade afternoons because we prefer the morning US session when many European traders are still online. Typically I reach my profit target by 10-10:30 am EST. I rather bank my profit than risk it on more trading. If my setups haven't occurred by 10:30am, they may still occur but they may take the rest of the day to reach their profit target. I don't want a trade that meanders all day. I don't want to look at charts all day. But that's just me. Others enjoy the thrill of the hunt and watching the market all day.

I think the most important thing is to be familiar with the instrument you are trading and understand the times of day it tends to move, the kinds of news releases that it reacts to, etc. Then find a strategy that exploits those tendencies of the instrument. Best wishes and happy trading.

 

[convertiblejay]

Anybody know how I can get the range bars with PPS that bobo talks about?