Best Time Of The Day Trading Strategy

This is an extremely simple trading strategy that simply buys at a specific time of the day and sells when the equity markets close (4PM EST).  This was an analysis primarily done to determine what time of the day is the most promising for a day-trader looking to go long the S&P 500. Do any patterns exist that could in fact be tradeable? Read on to see the results of our analysis.

Type Of Trading Strategy Day-Trade
Instrument Traded S&P 500 Index (ES)
Profit Factor 1.07
Total Trades 4,762
Percent Profitable 54%
Total Gain $38,250
Maximum DD * -$12,775
Period Tested 9/1/1997-11/2/2016
Tests Run 76
Best Setting 2:15 PM EST

AlgoGrader

Ease Of Use 85%
System Quality 15%
Percent Trades Profitable 54%
Trade It Live? 10%
  • Back-Tested
  • Walk-Forward Tested
  • Traded Live
  • Include In Featured System
Trading Futures & Options involves substantial risk of loss and is not appropriate for all investors. These strategies are not recommendations to trade but are provided for educational purposes only.

Other times of day worth noting:

9:30-9:40 AM EST

How did this time period rank?

Not Profitable

The first 10 minutes after the market opens, is in fact unprofitable in the back-testing.

10:10-10:25 AM EST

How does trading this time period rank?

Profitable

The data showed that after the market opens, waiting 40 minutes before buying could be an opportune time. All of these periods showed gains larger than $20,000 in the back-testing.

12:05-12:35 PM EST

How does trading this time period rank?

Profitable

All of these periods showed gains larger than $20,000 in the back-testing.

2:10-2:25 PM EST

How does trading this time period rank?

Most Profitable Period

The data showed that between 2:10 – 2:25 PM EST is the most opportune time to buy the S&P 500 going back to 1997. All of these periods showed gains larger than $30,000 in the back-testing.

Trading Strategy Rules

This is about as simple as they come. We buy the S&P Index every day at 2:15 PM EST and get out on the same day when the equity markets close.

  • Candle Length: 5 Minutes
  • Session Traded: 9:30 AM EST – 4:00 PM EST
  • Technical Indicators Used: None
  • Symbol: ES (S&P 500 Emini Futures)
Buy the ES at 2:15 PM EST every day

  • Use a market order
  • Stop: No stop was used in this analysis
  • Limit: No limit order was used in this analysis
Sell the ES at 4:00 PM EST (when equity markets close)

  • Use a market order
CFTC RULE 4.41: Results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.

Next Steps & Further Evaluation

This analysis was interesting in that of 76 different possible times to buy (using 5 minute increments when equity markets are open), 2:15 happens to be the most profitable time for a simple day trade. What makes this so interesting, is that this is the exact time that the FOMC makes its monetary policy statement. This strategy buys every single day, but even with all of that additional noise  – 2:15 PM is still the most profitable time to go LONG the S&P.

An interesting analysis would be to focus on the FOMC release days/weeks to see if those periods are more profitable than others – perhaps creating a swing trading system that enters at 2:15 and holds until Friday.

Also interesting would be to run the system again, however only enter on Thursdays – which happen to be the most profitable days to buy the S&P as our Best Day Of The Week trading strategy showed.

Trading Strategy Summary

It is TradingSystem.org opinion that this strategy should not be traded with live money.  This strategy was initially performed simply to determine if any time of the day  in particular is better than another for a LONG day-trade. Based on the back-testing, which has significant limitations per the below disclaimers, the best time of the day to buy the ES for a day trade is 2:15 PM EST.  No further analysis was done on this trading strategy – since the performance was not good enough to take this trading system to the next step.  Even without slippage & commission, this trading system has a profit factor of 1.07 – far below our minimum requirement of 1.30 to consider a trading system for further evaluation or for use in our Featured Trading System.