Characteristics of The 3 Major Sessions: Asia, Europe & USA
Asian Session
During the Asian market only 8 % of total daily transactions go through Tokyo desks. This is the least active of the 3 major sessions. Most of this 8% only involves yen based oil trading with very little trades happening for other trading instruments. This is the reason why it's not suitable to trade during this period. Not trading this period will save you a lot of time and money.
European Session
The London/European market takes the lion's share of the total transactions, 34% of all transactions are carried out during this session. London time zone is also well placed in terms of business hours for both eastern and western economies, this is when there are market overlaps and this results in high number of transactions during the this period. This time is most liquid and most volatile session for all the oil trading instruments.
The Europe time zone also includes the EUR zone member countries. The EUR zone has 17 members and major banks of these countries are open and there is a lot of liquidity as many transactions are being executed.
US Session
The US market takes up 20% of all transactions. The most active time for trading is approximately from 8 am to 12 pm when both London & New York dealing desks are open. This is when there is generally the highest volatility as it is also when the majority of the major US economic announcements are released.
European US Session Overlap
There are periods which have a greater volume of trade transactions, thereby increasing opportunities to make profit.
For day traders the most productive hours are the London and the US session overlaps and this is the peak for crude oil trades is when these two overlap when there is a large volume of transactions and the crude oil market is most active.
During this overlap a significant amount of fundamental news is released generating a lot of volatility and the oil prices move fast and there is plenty of opportunities to trade, this overlap offers the best opportunity for those wanting to maximize profit.
The best hours for trading, are during this overlap because the oil prices really move and the moves are decisive and offer the best chance to make profits
This is also why Asian traders, Japan will wait until afternoon to begin executing their oil orders, this is the period that will coincide with the Europe and USA market sessions.
Asian investors will not open oil trading transactions during the Asian time, therefore as an investor from anywhere in the world it's best stay away also, after all even the hedge funds & other pro investors from Asia will avoid this time and wait for until afternoon when it is a lot easier because of the liquidity during the US and UK overlaps.
Therefore to come up with the best hours using based on these 3 marketmarket sessions as displayed below:
Market Hours and Overlaps
The chart above shows the timetable of when each market session starts & when it ends. Chart also shows when there are overlaps & also shows the best hours based on these overlaps.
Summary:
Determine Your Schedule
The type of trader you are determines your schedule. If you don't have a lot of time then a longer term strategy would suit you best. If on the other hand you've a lot of time then you might decide to set a day trading schedule where you open oil trading transactions during the most active market hours. The above chart shows the best GMT times to be in the crude oil market - from around 800 GMT and 1800 GMT.
Determine your time-frame
To set up a schedule you need to determine your chart timeframe. Try using different chart timeframes until you find the most suitable and comfortable to use in accordance with your schedule.
Test your oil trading strategy
Test your oil trading strategy on a practice practice crude oil trading account for a period of two months or more. Keep track of every transaction and monitor the progress of your schedule. Try to analyze what times are most profitable for your oil trading strategy.
Your strategy should be specified on the trading plan that you use.
To learn more about how to specify this in your plan, read the tutorial about Oil Trading plan. This learn oil trading tutorial will show you an example of a format that you can use to specify your schedule.
