Trading The End (And Beginning) Of Daylight Savings Time

As the the seasons change across the world, some countries across Europe and the Americas also change their clocks. For those in the United States, there is a good chance you have been running your schedule on Daylight Saving Time over the summer and are now in the midst of falling back to standard time. However, for those areas in South America and Australia that observe the occasion, summer and Daylight savings time is only getting started.

I say "those that observe the occasion" because there are only a handful of countries on four of the world's continents that make the change, most of the world does not. Those that do make the change, do so on different days. With clocks moving forward and back across the world, it can affect trading for a bit. It can mess with average moves and the timing of the market.

Countries that will the change, and therefore the currencies you should watch, include:

• Australia (AUD) already changed October 1
• EUR, CHF, GBP will change October 28
• USD, CAD on November 5
• Japan (JPY) does not change
• The change is worthy of special attention, especially in the fall, since time is actually repeating itself in a way, with countries revisiting the previous hour after the change. In the spring, an hour is lost. However, the time change usually occurs over a weekend giving traders and markets time to make the adjustment.

Besides the feeling of jet lag without enjoyment of a trip, some studies have shown that because of the change in sleep patterns, decision-making processes are affected during the changes between DST and ST. Because of this, one study argued that Daylight Saving Time changes lowered stock market returns. It was also noted, “Evidence suggests that the positive relationship between return and volatility becomes negative on the Mondays following DST changes.” See NCBI PubMed. Further study shows there was an unfounded rebuttal.

People across the globe will continue to debate the pros and cons of time change. As traders, it is important to be aware of the approaching changes and take the necessary steps to insure accurate trades can be placed.

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