Over the past year (or two) I have observed anecdotally that the post-Europe close time, through lunch, has many times provided directional, trending (or, squeezing) moves in the ES. Additionally, I have observed that some afternoons we are just stuck in a tiny range. I see the 2pm to 3:30pm window, compare that to the 11:30 to 1pm window, and ask myself, why did I go to lunch and miss that nice reversal, only to come back to sit through chop all afternoon?
Yet, you still reading the trading advice: don't trade through lunch. Why? Well, I have read this in books as much as 20 years old, and it's probably in older books too, and the reason is simply that traders are "out to lunch", or something similar. Well, this may have been true as recently as 5 years ago, but today the volume which moves markets is so overwhelmingly conducted by automated programs, that this advice has begun to feel outdated to me. Algos don't eat, so, why would it matter what time lunch is? Even humans execute automated algorithms to trade increasingly more. I saw a blog from a well known trader who talked about executing his strategy (in stocks) by buying some outright at the open, and then letting a VWAP algo handle the rest. This is available to retail traders and is not advanced in any way these days.
So, sure, there is less volume and range over lunch, but what is it, "these days"? Here are the numbers, broken down by half hour and 15 minute increments, showing both the average and median range and volume. This is for all of 2023 in the ES, excluding holidays:
So, while the range drops every period into the European close at 11:30am ET, there is NO meaningful difference between lunchtime ranges and pre-close ranges. The 12:30pm and 1:30pm median ranges are in the 8's, but the other six half hour periods from 11:30am to 3:30pm are all in the 9's.
It's also worth noting that the averages are all higher than the medians for the same period, so we know that the outliers tend to be towards higher ranges, though that's not too surprising. We see bigger outliers for 2pm - 3pm, which is almost certainly due to FOMC days.
So, it seems like "don't trade over lunch" is due for a revision, in my book at least.