Understanding Time & how it can make you a profitable Day Trader

TLDR: Don’t trade 24/7. Avoid weekends entirely. Don’t trade 8pm - midnight UTC. Enter in a session open (Golden Zone). Exit when whales are exiting.

Crypto markets are open 24/7, but that doesn’t mean you should trade 24/7.

In fact, as a day trader there is nothing worse than perpetually being in a position. Your job is not to trade more, but to slip in and out of the market in the shortest time possible, executing the smallest possible # of trades to achieve your profit targets.

Most new traders have an understanding of liquidity. But they frequently overlook the importance of how & when liquidity is delivered.

BTC total derivatives volume is typically $40-60bn daily. Don’t be under the illusion that all volume is equal however, this is an unregulated wild west sector where a significant portion of volume is “fake” either through wash trading, volumisers, or other nefarious tactics designed to artificially pump exchange volume.

We know that volume isn’t equally distributed throughout the day, and that some portion of volume is fake or less impactful on the market through liquidity & intent. For example, I could set a $20m limit sell order and fire off 20 separate $1m market buy orders into this wall and not move price $1. Or, I could wait until the books are thin (lack of limit sell orders above) and fire a single $20m market order in, causing a spike in price, and possibly even trigger some traders’ short stop losses (market buy orders) and causing a further spike. Intent & liquidity matters.

So How Do We Find Areas of Intent & Liquidity?

If you’re reading this you’re most likely a retail trader, so I will assume you don’t trade with 7 figure+ position size. What does that mean for you? It means your intention in the market is to “hitch a ride” on the back of other, larger traders, rather than actually moving the market with your efforts.

Think about it. Take BTC for example. Have you ever moved the market with an order? Probably (definitely) not. You try to catch an entry at a key low or high, and then rely on whales, market makers & other traders to move the market to your take profit level.

Time is a variable that introduces uncertainty to a market. With each minute, hour, and day that passes we are provided with more information from the market in the form of technical data, news events, macro economic changes, and more. Therefore we can state with confidence that it is easier to predict what the market will do in the next hour than in the next week, the next month and so on. That doesn’t mean day trading is easy, quite the opposite in fact. What it means is we don’t want to spend longer in a position than is absolutely necessary.

To avoid overstaying our welcome in the market, we want to avoid low liquidity, low intent times of day. How do we do this? By focusing on the times when the greatest number of “live participants” are in the market. By live participant I am talking about everything excluding market makers and bots. MM’s and bots control the market in times of low volatility and they tend to have no directional bias, hence price doesn’t move much until a “live participant” comes along with an agenda and a reason to move the market.

There are specific times of day when liquidity is highest and reliable, volatile moves are made. Remember: Volatility is a traders best friend. You don’t want to trade when there is no volatility. So when can we guarantee liquidity & volatility? By following the path of traders across the globe. Here are our key trading time zones (referred to from here as Golden Zones):

1. US Futures Market Open/ BTC Weekly Close

2. Asian, European, and US Daily Sessions (Midweek)

3. Deribit Options Expiry (Weekly, Monthly, Quarterly)

4. CME Options Expiry (Monthly, Quarterly)

1 - US Futures Market Open/ BTC Weekly Close: (Sunday 22:00 - Midnight 00:00 UTC)

Although TradFi markets traditionally trade Monday to Friday, they do also have out of hours trading in the form of futures markets. Markets such as ES (S&P 500 futures) and NQ (Nasdaq 100 futures) open Sunday night and close Friday night.

Also referred to as Globex, the US futures session open is the first Golden Zone of each week, where we can expect volatility and liquidity to return to a quiet weekend market. Fakeouts in Globex hours are common, and the conventional wisdom is overnight (futures) markets run opposite to the cash session.

2 - Asian, European, and US Daily Sessions (Midweek)

Daily sessions run Monday - Friday (excluding public holidays) and are where institutions and trading desks are most active. These run in line with the Singapore, London, and New York stock exchange open times and are sometimes referred to as “cash” sessions.

We split the midweek cash sessions into 3: Asia, Europe, US (referred to from here on as Asia, London and New York sessions).

Summary (all times UTC)

Asia: 00:00-07:00

London: 07:00 - 13:30

New York: 13:30 - 20:00

You’ll notice that these times don’t cover all 24h. Between 20:00 - midnight is what’s referred to as “pre-close”. One of the worst times to trade, avoid it.

So now you may be thinking, can we guarantee liquidity within these times? These cash sessions cover 20h of the trading day, so I say no. We need to narrow the focus even further.

The most important times of each session are the open and close. Large traders/ institutional money will get involved in these key time zones. We’re day traders, so we want to enter at the open. The session close should be avoided for entries. Think about it, most big funds close their positions before the end of the trading day, so if they’re closing we don’t want to be opening.

Our “Golden Zones” for trade entry are:

Asia Open/ Daily Open (00:00 - 03:00)

Comprising the daily open, this timezone is where most trend days begin and Asia often sets the tone for the day/ week ahead. The first hour of the trading day (00:00 - 01:00) tends to see wild price swings and high volume. Don’t read too much into this from a directional perspective, these price swings tend to happen as institutions battle to get their positions filled.

London Open (07:00 - 09:00)

Considered a major centre of influence within traditional finance, the European session is not quite as important in crypto. Asia and the US definitely take precedent over Europe, but that’s not to say this timezone isn’t useful to trade. Many of the best setups come around the London open, which also coincides with the Asia close. London Open sometimes intersects with other Golden Zones, such as Deribit options expiry (every Friday on a weekly, monthly, & quarterly basis).

New York Open (13:30 - 15:30)

The US is the world's largest economy and legacy financial markets carry great significance in determining the fate of BTC and crypto. Whether the US markets are in risk on (bullish equities/ bearish DXY) or risk off (cash heavy, equities bearish), the major moves will occur in the NY open zone. The first hour of trading tends to carry the biggest injection of liquidity for the day. In crypto terms, the US session comes late in the day, so often the moves made are counter trend, or mean reversion plays.

3 - Deribit Options Expiry (Weekly, Monthly, Quarterly)

Each Friday 08:00 UTC

The biggest crypto options trading venue, especially for non US based funds. Track the size of OI expiring on a given date, and expect bigger moves on outlier days with large OI expiring.

As always, higher timeframe expiry = greater importance.

4 - CME Options Expiry (Monthly, Quarterly)

Friday 16:00 London Time (not UTC)

CME is the preferred venue for US options traders and institutional buyers & sellers. Much like Deribit, pay attention to the size of expiry.

A Word on The Importance of Days

As day traders we must also be mindful of key points in the week and month. By now you know that it doesn’t just matter how price moves, it also matters when price moves.

For example, Monday and Thursday are totally different in terms of intent. You don’t necessarily want to enter the same setup on a Thursday that you would on a Monday. This is because many funds will look to enter on a Monday and unwind part or all of their position by Thursday/ Friday. You can adapt your style to suit market conditions based on this. Did we pump Monday - Wednesday? Expect profit taking leading into the weekend as late retail longs give exit liquidity to early whales.

This logic expands further.

How do hedge funds get paid? Typically on a monthly retainer with added quarterly & annual performance fees. So what does that mean? Well if you’ve ever worked in a fund, or even in a commission based sales role, you’ll understand how big the difference is between Day 1 and Day 20 of the working month.

The first Monday of each month and each quarter is for positioning, generally this means new positions open, and some of the biggest market moves are made. The last Friday (and often the entire last week) of each month and each quarter is for rebalancing portfolios. That generally means positions are closed and funds consolidate before the next billing period begins.

The higher the timeframe, the greater the importance (New Quarter moves will be bigger than new Month moves).

How to Trade using Timezones

Chart your setup beforehand, and aim to fill your entry within the allotted timeframe. Say for example BTC is trading at $43000 and you’ve spotted a potential bullish demand block at $42300, and want to enter a long there. You might ask yourself “well why not just place the trade when it hits my level, regardless of time?”. This brings us back to the point of these zones, liquidity & intent. In the above example, you might see price hitting $42300 at 23:00 (a no trade zone for us), and if you observe this you’ll notice that usually the move is unreliable due to low volume and lack of “live participants”. In day trading it’s not enough to just hit your target entry price, you also have to ensure the timing is right.

In summary, here are my Time based rules when day trading crypto:

• Chart your ideal setups ahead of time.

• Enter only in a Golden Zone.

• Golden Zones are areas of high liquidity due to events (options expiry, futures expiry, daily/ weekly open), fund management activity (rebalancing portfolio), news driven (big stock market news/ company press releases, earnings etc.).

• Price leads news. Now that you’ve learned the secrets of time & price, you’ll begin to realise that major news is almost always released during these Golden Zones. That is no accident, large players know that you should release news into high liquidity if you want to get your trades filled.

• If you have specific price levels of interest chances are the whales and smart money also see these levels. Make sure you trade through a Golden Zone because the zone is a liquidity event where the bigger players can find enough size to fill their orders. You can more easily piggyback off their move this way.

• Avoid taking a trade before or when entering a Golden Zone.

• Always remember: Think Like a Whale.