Various Seasonality

The Rise and Fall of Coffee Prices During the Day

Elena Berseneva 29 december 2021 177 3

Many traders wonder which hours of exchange operation are better suited for trading confidently while constantly increasing deposits, and during which it is best to refrain from making deals.


In this article, we will reveal the most appropriate timing for trading coffee futures and see when its price rises and when it falls.

Hypothesis
To conclusion

The price of coffee futures rises at the opening and closing of the trading session.

To conclusion
Data used
  • Financial instrument: US coffee futures contact (ticker - KS);
  • Depth of the available data history: 3 years (03/10/2016 - 30/09/2019);
  • Total: 13 714 observations.
  • Timeframe: М30 (30 minutes).


For time unification purposes we will use the UTC+0 time zone.

We will examine the data for the following periods in the context of months:

  • 30 minutes
  • 1 hour
  • 2 hours
  • First half of the European session / second half
  • First half of the American session / second half
  • European session before American / all of the American session


We will also compare:

  1. Price changes in the first hour (30 minutes) and price changes during the rest of the day;
  2. Rise / fall of the price during the first hour (30 minutes) of the American session, and the rise / fall of the price during the rest of the day;
  3. Price changes during the first hour and the last hour.


Trade in coffee futures takes place between 8 AM and 5 PM (UTC+0) 5 days a week.


So, let us find the best time of the day to trade coffee futures.



We will evaluate the results according to two criteria:

  • Average price change - reflects the average percentage change in the quotes for coffee futures, in %. It is calculated with the following formula:


("30 minutes" closing price – "30 minutes" opening price) / "30 minutes" opening price * 100


  • Share of cases with a price increase, in %.



Half-hour intervals:


Parameter
8 am
to
8.30 am
8.30am
to
9am
9am
to
9.30am
9.30am
to
10am
10am
to
10.30am
10.30am
to
11am
11am
to
11.30am
11.30 am
to
12 pm
12pm
to
12.30pm
Average price change,%
0.037
-0.011
0.014
0.001
0.013
-0.016
-0.001
-0.016
0.013
Share of price increase cases, %
45.0
41.1
46.2
43.0
45.1
40.5
42.6
45.3
48.0


Parameter
12.30pm
to
1pm
1pm
to
1.30pm
1.30pm
to
2 pm
2 pm
to
2.30pm
2.30pm
to
3 pm
3 pm
to
3.30pm
3.30pm
to
4 pm
4 pm
to
4.30pm
4.30pm
to
5 pm
Average price change,%
0.008
-0.010
-0.036
0.023
0.004
-0.004
-0.013
-0.017
-0.007
Share of price increase cases, %
46.9
49.4
43.5
48.2
47.7
48.2
44.2
45.5
43.8


The half-hour intervals mark the largest price growth at the opening of the European trading session, while the largest drop is observed in the period from 1.30pm to 2pm, at the opening of the American trading session.



1-hour intervals:


Parameter
8am
to
9am
9am
to
10am
10am
to
11am
11am
to
12pm
12pm
to
1pm
1pm
to
2 pm
2 pm
to
3 pm
3 pm
to
4 pm
4 pm
to
5 pm
Average price change,%
0.026
0.015
-0.003
-0.018
0.021
-0.046
0.028
-0.017
-0.024
Share of price increase cases, %
49.3
54.3
47.5
48.6
50.0
49.8
51.2
50.0
49.2

1-hour intervals mark the largest price growth at the opening of the European trading session and from 2pm to 3pm of the American trade session, while the largest drop is observed in the period from 1pm to 2pm at the intersection of the American and European sessions.



2-hour intervals:


Parameter
8am
to
10am
10am
to
12pm
12pm
to
2 pm
2 pm
to
4 pm
4 pm
to
5 pm
Average price change,%
0.042
-0.020
-0.025
0.010
-0.058
Share of price increase cases, %
54.3
49.1
48.9
50.8
47.6

2-hour intervals mark the largest price growth during the first 2 hours after the opening of the European trading session, and the largest drop falls into the period from 4pm to 5pm at the end of the American trading session.



Let us compare the results of trading sessions:


European session. First and Second half
Parameter
8am to 12pm
12pm to3.30pm
Average price change,%
0.021
-0.001
Share of price increase cases, %
49.2
48.6


American session. First and Second half
Parameter
1.30pm to 3.30pm
3.30pm to5pm
Average price change,%
-0.026
-0.058
Share of price increase cases, %
47.4
47.6

The first half of the European session shows an increase in the price, the second - a slight drop. The American session shows a fall in the price, and notably its second half shows a 2-fold drop in the price, compared to the first half.


European and American sessions
Parameter
8am to 1.30 pm
1.30 pm to 5 pm
Average price change,%
0.032
-0.084
Share of price increase cases, %
51.2
47.9


First hour and Last hour of the trading day
Parameter
8amto9am
4pm to 5pm
Average price change,%
0.026
-0.024
Share of price increase cases, %
49.3
49.2

By comparing the trading results by session, we can see that during the European trading session there is an increase in prices, and during the American session there is a fall.


The price rise in the first hour of the trading day almost mirrors the fall during the last hour of trading.



Let us compare the changes of the coffee price during the first 30 minutes and first hour of the trading day to the changes over the rest of the trading day:


Parameter
8amto8.30am
8.30am to5 pm
Average price change,%
0.037
-0.087
Share of price increase cases, %
45.0
46.3


Parameter
8am to9am
9am to5 pm
Average price change,%
0.026
-0.078
Share of price increase cases, %
49.3
47.3

The first 30 minutes of the trading day show a greater increase in the price compared to the first hour. The rest of the trading day in the first case shows a greater drop in the price compared to the second.



Let us compare changes in the price of coffee during the first 30 minutes and the first hour of the American trading session to the changes over the rest of the trading day:


Parameter
4.30pm to5 pm
5 pmto8 pm
Average price change,%
-0.036
-0.048
Share of price increase cases, %
43.5
48.6


Parameter
4.30pmto5.30pm
5.30 pmto 8 pm
Average price change,%
-0.013
-0.071
Share of price increase cases, %
48.6
45.9

We can notice a price fall during the American session, which is the most noticeable during the first half hour.

Conclusion
  • During the first half of the European session, the price of coffee futures grows, while during the second half it experiences a slight decline.
  • Throughout the entire American trading session, the price of coffee futures falls, with major falls taking place during the first half hour.
  • Since the price of coffee futures rises during the European trading session and falls at the opening of the American session, we can view this period as the tilting point of the trading day. With the opening of the American trading session at 1.30pm, we can expect a decline in the price of coffee futures.


The influence of time intervals on the cost of coffee during the day has been established.

Detailed results are presented in the appendix:

XLSX (0.07 MB)Application to the article 'The rise and fall of coffee prices during the day.' eng.xlsx

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