Wondering when it might be the best time to trade the stock market? Wonder no more. Just read through this article to the end, to get the answers you want. However, let’s state here that devoting two to three hours a day is often better for most traders of stocks, stock index futures, and index-based exchange-traded funds (ETFs) than buying and selling stocks the entire day.
When it comes to buying and selling stocks, specific hours, offer the greatest opportunity for day trading. Thus, trading only during these hours can help a great deal in maximizing your efficiency. You’ll notice that trading all day, takes up more time than is required for very little additional reward. In most cases, even professional day traders, tend to lose money outside of these ideal trading hours.
What are the Best Times to Day Trade in the Stock Market?
Although not set in stone, the best times of the day to trade the stock market, maybe the first two hours of the day. In the United States, the two hours to trade is from the time the market opens at 9:30 a.m. ET to 10:30 or 11:30 a.m. ET. Another good time to trade may also be the last hour of the day. In the United States, that would be 3:00 – 4:00 p.m. ET.
Trading When the Market Opens
As earlier stated, trading during the first one to two hours when the stock market is open on any day is all that most traders want.
This is because, the first hour tends to be the most volatile, and offers the most opportunity. Even though this may sound harsh, professional traders, often know that a lot of “dumb money” is actually flowing at this time.
When we talk about “dumb money”, it is the phenomenon of people making transactions depending on what they read in the news or what they’ve seen on TV. Now, the information these people are trading on is typically obsolete. Thus, their trades can create sharp price movements in one direction. With this, professional traders can take advantage of the overly high or low price and push it back the other way.
New-day traders on the other hand are often told not to trade during the first 15 minutes of the day – and that might be good advice for very new traders also. However, the first 15 minutes, typically offer the best opportunities for seasoned traders. Now, this time period can provide the day’s biggest trades on the initial trends.
Best Trading Time of the Day
When it comes to trading stock, regular trading starts at 9:30 a.m. ET. Thus, the hour ends at 10:30 a.m. ET is often the best trading time of the day. This time offers the biggest moves in the shortest amount of time. So, if you want another hour of trading, you can extend your session to 11:30 a.m. ET.
Most professional day stock traders are known to stop trading around 11:30 a.m., owing to the fact that, that’s when volatility and volume tend to taper off. At this time, trades take longer, and moves are smaller on lower volume, which is not a good combination for day trading.
For Futures trade, virtually 24 hours per day during the weekday. So, this means that if you are day trading index futures like the E-mini S&P 500 (ES) or an index-based ETF like the SPDR S&P 500 (SPY), you may start trading as early as 8:00 a.m. during pre-market hours, and start tapering off at around 10:30 a.m. This provides a solid two hours of trading, which usually comes with a lot of profit potential.
Trading During the Last Hour
Most day traders, also love to trade during the last hour of the day. From 3:00 to 4:00 p.m. ET, the time, where traders have had a long break since the morning session, allows them to regroup and regain their focus.
However, the last hour can be a lot like the first when you are looking at common intraday stock market patterns. This is full of bigger moves as well as sharp reversals. Just like the first hour, most amateur traders, jump in during the last hour, either buying or selling, depending on what has happened that day. When this happens, dumb money again is flowing around, even though not as much as there was in the morning. This money would be ready to be taken up, by more experienced money managers and day traders.
Best Days and Months to Trade the Stock Market
Beyond the hourly hours of trading, you should also project for the long term. Monday afternoon, also provides a good time to buy, since the market historically tends to drop at the beginning of the week, particularly around the middle of the month. Most experts are of the opinion that selling on Friday before that Monday dip occurs. Particularly if that Friday happens to be the first day of the month or when it precedes a three-day weekend.
Also, prices tend to drop in September and then hike again a month later. October is also generally positive overall, and prices often go up again in January, especially for value and small-cap stocks.
On the whole, day trading needs discipline as well as focus. You don’t need to overwork them. If you can trade only two to three hours in a day, you may be able to stay on top of your game. However, if you try to trade six or seven hours in a day, you may end up getting drained, and being more susceptible to mistakes.
Be it as it may, everyone has a different focus and discipline level. Some traders have the expertise of buying and selling all day and can pull it off well. However most do better by trading only during the few hours that are best for day trading.
On the whole, you have to understand how day trading works, before you delve in, to ascertain if it’s actually the best for you. This is because, day trading is not for everyone, and there are many rules and risks involved.