The 9pm to 11pm GMT dead zone

[Fairman]

The 9pm to 11pm GMT dead zone

There is a stretch after New York closes and before Tokyo gets properly started where almost nothing makes sense. Spreads sit wide, quotes jump by a pip on a few small orders, and the charts look like static.

For a scalper, this period combines the worst features of both worlds. Costs are high because spreads are wide, and the signals are poor because there is no real flow to follow. A technical setup in this window is mostly a coin flip with a house edge against it.

Yet it is also the time when many retail traders, in time zones where evening is free time, are most active. The combination of eager traders and bad conditions produces a lot of unnecessary losses.

A pattern worth testing is simply excluding this window from the strategy for two months and comparing the equity curve. In many cases the line gets smoother and the net profit barely changes.

The rollover hour sits right at the start of this stretch, and the lingering effects of wide spreads and thin books carry into the next hour or two. The rest of the window is the transition between two sessions that barely overlap. Compared with the London and New York overlap, which has deep books on both sides, this hour has a handful of providers and a lot of idle capital.

What is the trading window that works best, and does it match the hours when the market is actually active?

[Fairman]

Between roughly 9pm and 11pm GMT, New York has wound down and Asia hasn't really started. Wellington and Sydney are opening, but liquidity is thin. Rollover at 5pm New York falls at 10pm GMT in winter and 9pm GMT in summer, right in the middle of this window, and spreads widen sharply around it. For most scalping strategies, this is the worst time of the day to trade, with wide spreads, low volume and erratic moves. The exact timing shifts with daylight saving, so it is worth checking each year.

[Amanhasnoname]

I used to trade straight through this window on a London based account, and when I finally pulled my statements apart the hours between 9 and 11pm GMT were responsible for roughly a quarter of my trades but a bit over a third of my total losses. The spread on EURUSD that I normally paid at 0.3 pips was regularly 1.2 to 2 pips right after rollover, and my setups, which are built for steady flow, were obviously not made for that.

I tried the exclusion test from the opening post. For eight weeks I simply blocked new entries between 8:45pm and 11:15pm, and my net result barely changed in pips, but the account curve was smoother and I stopped making revenge trades before bed.

The only exception I kept is a position I already hold from the New York session, and I move its stop to break even before the window starts so that a spread spike cannot harm it.