What are market reaction times?
There are technical facts about the market that every trader should know. This includes identifying and anticipating when changes in the price and volume of the market will occur. One of the easy ways to do this is by knowing the reaction times in the market. Reaction times are specific moments throughout the trading day when it is more likely to be a dramatic increase in the volatility of the market. Traders must be aware that these are not “polite” movements in the price and can often take traders by surprise. Below is a table that lists the major and minor reaction times of the market.
Reaction Times in the Market (EST)
|8:30 AM Major|
|10:00 AM Major|
|11:15 AM Major|
|12:00 PM Minor|
|1:30 PM Minor|
|2:15 PM Major|
|3:00 PM Minor|
|3:30 PM Major|
What’s the difference between major and minor reaction times?
Major reaction times means that it is more likely that the price will break major areas of support and resistance and the change in direction of the price can be sustained for a long period of time. For example, if the market was moving in an uptrend before then during the reaction time it is more likely that the direction of the trend will change to a sideways pattern or a downtrend. Minor reaction times mean that it is also likely to get a move in the price but it may not be sustained. For example, the price pattern may easily form a double top or double bottom.
Reaction times occur in all financial markets but are more consistent in the stock and futures market. This is true because it is often at these reaction times that certain economic indicators or major news are being released. For example, crude oil inventory reports are usually released every Thursday at 10:00 am EST and this drastically impacts the price of oil futures (Symbol:CL).
How should traders use market reaction times?
Traders can approach reaction times differently depending on their level of skill. For novice traders, it is recommended that they play it safe and stay out of the market at these times. More advanced traders may choose to trade only during the reaction times. Reactions times are also good points throughout the day to make a habit of scanning the market for new trading opportunities. This is especially beneficial for traders who are looking for very short-term opportunities to take advantage of small changes momentum.