When Daylight Savings Time (DST) comes into effect on Sunday 27th October 2024 it can significantly impact UK traders, especially those involved in global markets. Whether you’re trading forex, stocks, or commodities, understanding how market opening and closing times shift during this period is essential for optimizing your strategy.
The main impact in terms of trading for UK traders is that the New York market opens at 2:30 PM instead of the usual 1:30 PM when the UK is on GMT.
Let’s dive into how DST impacts trading, the specific market hours you need to watch out for, and tips for adjusting to these changes.
What Is Daylight Savings Time?
Daylight Savings Time (DST) is the practice of moving clocks forward by one hour during the warmer months (usually between March and October) to extend evening daylight. In the UK, DST starts on the last Sunday in March, when the clocks move forward one hour, and ends on the last Sunday in October, when the clocks move back by one hour.
Impact of DST on UK Trading
For UK traders, DST has a significant impact because many of the world’s key financial markets, such as those in the US, Europe, and Asia, are in different time zones. When the UK shifts to British Summer Time (BST), which is GMT+1, it alters the alignment between UK market hours and other global trading hubs.
Here’s how different markets are affected:
Forex Market Opening and Closing Times
The forex market operates 24 hours a day across major financial centers globally. However, when DST kicks in, the market hours shift.
- London: 8:00 AM to 4:00 PM (BST)
- New York: 1:00 PM to 9:00 PM (BST)
- Tokyo: 12:00 AM to 8:00 AM (BST)
- Sydney: 10:00 PM to 6:00 AM (BST)
Before DST, London is five hours ahead of New York, but when the clocks change, the difference reduces to four hours. This time shift means the most active trading period—when both the London and New York markets overlap—moves slightly, impacting liquidity and volatility.
For forex traders, this overlapping time between 1:00 PM and 4:00 PM (BST) is crucial because it’s when the market tends to be the most liquid and volatile, providing more opportunities.
Stock Market Opening and Closing Times
The stock markets also experience time shifts during DST, which can influence how UK traders manage their portfolios.
- London Stock Exchange (LSE): 8:00 AM to 4:30 PM (BST)
- New York Stock Exchange (NYSE): 2:30 PM to 9:00 PM (BST)
- Tokyo Stock Exchange: 12:00 AM to 6:00 AM (BST)
- European Markets: 8:00 AM to 4:30 PM (BST)
During DST, UK traders have to adjust their schedules for trading on the NYSE or NASDAQ. The New York market opens at 2:30 PM BST instead of the usual 1:30 PM when the UK is on GMT. Similarly, Tokyo’s session starts at midnight BST, giving UK traders the opportunity to engage with the Asian market earlier in the day.
Remember: The GMT shift happens in October, so from October to March the New York markets open at 1.30PM in the UK, not the usual 2.30 PM you might be used to during the summer.
Commodities and Futures Markets
If you trade commodities like oil, gold, or agricultural products, or are involved in futures markets, DST will also affect the timing of these trades:
- Chicago Mercantile Exchange (CME): 2:00 PM to 9:00 PM (BST)
- New York Mercantile Exchange (NYMEX): 2:30 PM to 9:30 PM (BST)
The Chicago and New York markets are crucial for commodities traders. With DST, you need to account for the fact that both open an hour later in the UK. If you’re trading based on market open or close strategies, this slight shift could impact your timing.
Key Considerations for UK Traders During DST
- Prepare for Market Overlaps: When UK moves into BST, take note of the reduced overlap between the London and US markets. This can lead to different trading volumes during those periods. The overlap between 1:00 PM and 4:00 PM (BST) remains critical for forex traders, but the overall window shortens.
- Adjust Your Trading Schedule: If you trade stocks in US markets or forex pairs involving US dollar, adjusting your strategy is crucial. You’ll need to be aware of the new opening and closing times, especially if you rely on opening gap strategies or trade the NYSE or NASDAQ’s closing hour.
- Watch for Increased Volatility: The shift to DST may lead to increased volatility, particularly during the first few days as markets adjust to new times. It’s important to remain cautious and perhaps avoid over-leveraging in these periods.
- Be Mindful of Economic Data Releases: Economic reports such as US non-farm payrolls, Federal Reserve announcements, or European Central Bank releases can heavily influence the markets. With the shift in market times, you’ll need to adjust your schedule to catch these events live.
Impact on Weekend Trading
For traders who are involved in cryptocurrency or other markets that are open over the weekend, DST has less of an impact. However, the change in timing during weekdays may still require some adjustment in weekend analysis or preparation.
How to Manage the Impact of DST on Trading
Here’s how you can better manage your trading during DST:
- Use a Trading Journal: Track how market movements change with DST and how it affects your strategies.
- Automated Trading: Consider automating some aspects of your trading to help you manage the time shifts, especially if you trade across multiple markets.
- Set Reminders: Use calendars and alerts to adjust your schedule for key market open and close times.
- Check Broker Times: Always check if your broker’s platform has adapted to the new DST hours. Sometimes, there can be a delay or discrepancy depending on their data providers.
Staying Ahead of the DST
Daylight Savings Time might seem like a minor inconvenience, but for UK traders, it can significantly impact your trading day. Whether you’re trading forex, stocks, commodities, or futures, understanding how market hours shift is crucial for keeping your strategies sharp. By planning ahead and making slight adjustments to your schedule, you can ensure that you stay ahead of the game and continue making informed trading decisions.
The most important takeaway is to stay flexible. As UK traders, the shift to BST means being mindful of market overlaps and liquidity changes, especially when trading global markets like New York or Tokyo. And with the right preparation, you can leverage these shifts to your advantage.
James is a former FTSE100 AI Director and trader with 10+ years trading his own capital. He is the Managing Director of SpreadBet.AI and currently trades his own capital through both CFD trading & spread betting as well as working with one of the leading prop firms in the world.
