Forex 24 Hour Day
Forex markets open continuously 5 days a week, 24 hours a day. The usual time the retail forex markets open is on Sunday at 5 pm, North America Eastern time, until Friday at 5 pm in the same week. Some brokerages offer trading outside of this schedule, but majority of the trading activities happen within the normal trading hours. So one trading day with the forex markets is normally 24 hours from 5 pm to 5 pm Eastern time.
But Sometimes It Starts At 6 pm
Since 2007 US introduced the new Daylight Saving Time (DST) schedule, there is a one week period at the start of DST and another one week period at the end of DST that the open time for the week becomes 6 pm on Sunday and ends on Friday 6 pm. It happens due to the fact that other countries, especially European countries, do not follow the US time to operate their businesses.
International banks cannot just move their settlement time earlier on foreign exchange transactions. Once the European countries and North American countries (US and Canada) having their time realigned after that 2 special weeks, the 5 pm Eastern time kicks in again as the normal time for marking the start (and end) of a trading day.
Not All Daily Data Are The Same
The 24 hour timeframe used within DaytradingBias.com on forex data uses the definition above for a trading day. The reason why it has to be so specific because people often use daily data from their brokerage trading platform without questioning how the trading day is recognized. Very often, the data is pre-generated using fixed rules of which data is collected off the time their computer servers are set to. Hence the historical daily data you have may not be what you think they are.
Data inconsistencies can lead to disastrous results. When you use daily data in combination with intraday data for historical strategy testing, they have to be representing the exact same period of time for the strategy test to be valid. For example, the daily data may contain information leaked from future intraday data because of the way the daily bar was constructed. It can happen easily as there is no standard rules for the daily data collection to follow.
Unless you have verified the intraday data against the daily data yourself to confirm the accuracy of the data, do not assume the daily data is collected the way you think it is supposed to be.
In case you are still confused of what I am talking about, let’s take a look at the following situation.
Brokerage A offers its own trading platform with both daily and intraday historical data for charting and strategy testing. Their server time is set to UTC standard time to collect daily data. Sounds good so far isn’t it? At least they are collecting daily data using the universal standard time, right?
The catch is that most trading/charting platforms chart the intraday data using the client’s local computer time. It is the preferred method, by the way, to use the local time so that retail clients, who in general has no idea what international time zones mean, will not call to complain that the time is not correctly displayed on their charts.
If you are not aware of the potential problem, you would assume the daily charts are showing daily bars containing data from 12 am to 12 am, your local time. That means, you are likely having the wrong high/low/close information on the daily chart because there are a total of 12 major time zones. A mismatch is very likely.
For those who use indicators, that turn in your daily bar chart with your favourite oscillator could be using data from today as oppose to the close of previous trading day you are thinking of.
We are talking about trading signals generated from incorrect data. Your money is on the line. It is a big problem.
To align your intraday charts with your daily charts, there are several workarounds you can try.
First, you need to know how the daily data is collected by your brokerage. This can be done by a little reverse engineering. All you have to do is to load up a week of hourly bars and compare that to the daily bars. By checking the day close values on the daily bars to match against the hourly, you should be able to tell the cut-off time quite easily.
Now, you have several choices to proceed from here.
You can set your computer to the time zone matching the one the daily data is collected by your brokerage. What I mean is that you can change your computer time zone so that its midnight time matches the time they have the cut-off time for a day. That way the daily data would match the intraday data properly at once.
This method solves the problem of the daily and intraday data not aligned properly, which is good enough if you just need a way to deploy trading models without false signals triggered, or that you are daytrading and need the properly higher timeframe readings.
Another way to deal with the issue depends on your trading / charting platform. If your platform can produce 24 hours chart from hourly or minute data, you can generate the correct daily data with respect to any time zone you are using. All you need to do is to use 24 hour bars in place of your daily bars in the charts to get the correct information. They will be aligned correctly with your intraday data automatically as they are all set to the same time zone.
Now, if you want to research on forex data the way I do, you need to set your computer (or your trading/charting platform if it can do that) to use Eastern European Time including the standard European Daylight Saving Time schedule. Then, use 24 hour charts in place of the regular daily charts. It will match the way I am using my historical data and you will be able to see the daily patterns I mentioned in the site.