Stock trading has baffled trading experts around the world for quite some time. Earning money through these trading markets is no easy task. Stocks are particularly volatile, and their prices frequently change due to prevailing political, conflictual, and economic conditions in regional and international markets.
Even as an expert trader, it can be difficult to decide exactly what time is the best for trading stocks. How can you figure out when the price hikes? When is the market stable? When can you get instant turnarounds? Whether you’re a novice or an expert, the answers to these questions aren’t easy. If you figure it out, it can be quite rewarding, but the process of doing so can be nightmarish.
However, the decades-old trade system has allowed experts to craft out a decipherable pattern for the best time of the day to buy stocks. Instead of wasting your time and energy trying to buy or sell stocks on a trial and error basis, you can single out time periods that will profit you the most. Experts, such as Cory Mitchell, say spending a few hours trading stocks in enough. So, there’s no point in wasting your whole day.
If you’re interested in trading stocks, one of the most important things you should know is what is the best time of the day to buy stocks. As we said, stock prices are volatile, so they change a lot during the day as well. To get the most out of your money, know the right time to buy. Here are some of the best times during the day to buy stocks.
As Soon As the Opening Bell Chimes
One of the busiest times to buy stocks is during the first hour of the day when the market is running wild. As soon as the market is open for trading, traders flood in, armed, and ready.
The first golden day trading hour usually begins around 09:30 a.m. ET. It is brimming with opportunities right up till 10:30 a.m. If the market is still active, you can continue your session for another hour and close the trade temporarily at 11.30 a.m. This is no hard and fast rule; this is just the usual path most successful traders follow religiously.
This is one of the most competitive times to buy stocks because expert traders can easily spot which stocks are overpriced and underpriced, thus profiting more than they would at any other time of the day.
How do they know? And why is stock trading so lucrative in the first hour? That’s because this is the time when dumb money flows in. I know it sounds, well, dumb, but it’s true.
Dumb money refers to people, usually those with little stock trading experience, buying and selling stocks when the market opens based on incorrect or outdated information. For example, they may be trading stock based on old news or entertainment gossip. This can shift stock prices immediately, either overpricing or underpricing stocks.
Seasoned traders, or beginners who’ve done their research, can use the first hour to spot stocks that are at a particularly high or low price and trade them. The first fifteen minutes are especially important because the fast trading of stocks starts to slow down afterward.
Can Newbies Take the Plunge?
You can probably tell how hectic the first hour of the day is for stock trading. Hence, this time of the day isn’t exactly a walk in the park for new day traders. While everyone is busy trading, a new day trader may feel lost and out of place in the busy market. This is why beginner traders are often told to hold off from trading in the first hour.
While the first hour is highly rewarding, it is also highly risky. There is a good chance that you may lose money during this first hour if you’re not skilled enough. But if you’re dead sure about taking the risk, you can try to consult a broker to help you out. These middlemen keep some commission but will provide you the best trading advice for day trading.
Newbies don’t need to rush. Take your time, keep calm, and design your strategy without paying heed to the competitiveness.
Before The Market Opens
For preset trading arrangements, also known as futures, it’s best to start out earlier than the regular market timings. You can start premarket trading around 08:30 a.m., an hour before the official bell sounds. So, for actively traded index exchange-traded-fund (ETF) or for the S&P 500 SPDR, premarket hours are an ideal opportunity for day trading.
You can carry out this session for two hours and close at 10:30 a.m. If the market is still active, you can get another hour to trade and close the session at 11:30 a.m.
Premarket trading means that you’ll get an advantage over your competition by reacting more quickly to news or changes that happened after the market closed on the previous day. But, if premarket trading is so great, why isn’t everyone doing it?
Well, for starters, it’s riskier because there’s less volume of stocks available before the market opens. In addition, the prices during the premarket trading session do not necessarily reflect what the prices would be when the market opens.
Remember what we said about dumb money flowing in and changing prices? That’s what makes the first hour so lucrative, and you’d miss out on that in the premarket session.
The Mid Day Calm
Once the initial fizz dies down and professional traders take a break, newbie traders can come out to try their luck. This is the time when traders are calculating their day’s losses and gains and are planning strategies for the next trade session.
During mid-day, traders are waiting for fresh reports from around the world so they can trade after factoring in new prices. These waiting hours tend to be a lot more stable than the rest of the day.
So, while the profit may not be too much, the risk will also be low. It’s the perfect time for those that are completely new to trading! You can learn and practice in a low-pressure environment.
Alexander at daytradingz.com also talks about how this waiting duration, or mid-day calm, is the best opportunity for newbie traders. The prices have stabilized, and the turnout from your trading will be a lot more predictable. As a newbie, these two, three hours, are your comfort zone. So be sure you make the best out of them!
The End Of The Day
As the day comes to an end, the hour before the final bell is a hectic one, from 3:30 to 4:00 p.m. This is the time when traders have factored in the day’s news, currency prices, and geopolitical conditions.
However, owing to the lack of time, traders don’t get enough time to carefully plan out new strategies. This means to some extent, they trade relying on luck and intuition, so the prices are greatly unpredictable at this time.
The unpredictability also means that you can unexpectedly get a turnaround bigger than what you could’ve anticipated at the start of the day. Traders even haste to make some profit, so they’re willing to rake in as much as possible.
All in all, the last hour can be your four-leaf clover if you plan just the right strategies. Competition is also relatively lower because even the most polished and experienced traders often miss out on something crucial while planning their strategies. We’re sure this last hour is a great learning opportunity!
Pre and Post Marketing
Online Trading Academy has some great advice on pre and post-marketing timings. Due to global time zone differences, traders often face a shortage of sufficient time. In all, the average stock market gets 6.5 hours to trade. Out of this, the trade is active for merely two or three hours.
If this time constraint is disturbing your trade business, try to invest some extra time. Get a broker and trade during the premarket time. This is counted as the time period from early morning right up to the time of the commencement of the day’s trading. You have to be an early bird and get up around 04:30 a.m. to make the most of international trading activities.
Premarket trading can last up till 09:00 a.m., after which you must get into the usual trading madness at your local stock exchange.
Similarly, the hours after the day trading has officially ended are also often profitable, but only if you play your cards right. Post-market opportunities are the ripest between 04:00 p.m. and 08:30 p.m. Eastern Standard Time.
Traders are closing their entries, planning new prices, and accounting for fresh news. If you make enough effort, you can make big bucks even after the market has closed for the day!
How Many Trades Should You Place On a Day?
As a day trader, you should determine the frequency of your trades depending on your financial goals of the day, week, month, year, or project. There’s no definite set of rules to tell you how many times a day the trade will be ideal for you.
If you want an even more detailed account, you should take a look at what daytrading.com has to say. As a day trader, you may fall under the category of a pattern day trader if you trade often.
Once you’ve established your regime in the stock market, there are plenty of rules that restrict your freedom to trade. However, trading too often and too recklessly can cost you a lot. As a newbie to this circus, it’s better to lie low while you learn the market dynamics.
Day trading requires you to be alert and responsive to market ups and downs. When to open the trade, when to wind up, when to expect turnarounds and when to wait patiently. Stock trading doesn’t only let you buy and sell.
It allows you to play a role in the overall economic contribution to the market. As a day trader, your duty is to immediately adapt to the changing political, economic, and geographical conditions. The best day trading times will only bear some fruit if you water your trees with great care and tactics.
Blake is a self-made online day trader with a knack for adventure. On his free time, he loves reading and learning new methods in the trading as well as improving his jiu-jitsu skills. He currently resides in New York City.