ETH and RTH: Why Market Hours Matter
When working with backtests or indicators, you may notice differences compared to earlier results or other charting platforms. This is usually due to how market hours data is handled.
What are ETH and RTH?
Extended Trading Hours (ETH)
Includes pre-market and after-hours trading sessions, occurring outside the standard exchange operating hours.
Regular Trading Hours (RTH)
Refers to the official market hours when the majority of trading activity and volume takes place.
Note: For US equities, there has been a transition from ETH data to RTH to ensure that backtests and indicators better reflect actual market trading conditions. Previously, ETH data was included, but this is being phased out to improve consistency and accuracy.
Why this change?
Using only RTH data helps ensure that backtest results are closer to real, tradable conditions. Since most trading activity and liquidity occur during regular hours, this approach provides more reliable and practical insights.
Impact on Backtests
- Trade Execution: Trades will trigger only during regular market hours.
- Historical Comparison: Results may differ from previous backtests that included ETH data.
- Strategy Sensitivity: Strategies relying on after-hours price movements may show different performance.
Impact on Indicators
- Calculation Shifts: Indicator values (like Moving Averages or RSI) may change compared to what was seen previously because the data points from ETH are removed.
- Platform Alignment: Greater alignment with professional platforms that exclude extended hours data by default.
Summary
Focusing on RTH data improves the accuracy, consistency, and realism of both backtesting and indicator calculations, making them more reflective of actual market conditions.