What is the Best Time to Buy and Sell Stocks?

Key intraday stock trading sessions

Grasping the intricate rhythm of the stock market’s intraday trading sessions is pivotal for both novice and seasoned traders. Each session carries its unique tempo and opportunities, often influenced by systemic factors, market sentiments, and global economic events.

Here, we dive into each session's distinct attributes and the strategic considerations traders must account for to navigate these waters successfully.

• Pre-Market Trading (8:00am ET - 9:30am ET): Before the official market open, pre-market trading kicks off the day for eager investors ready to get ahead. Running from 8:00 am to 9:30 am ET, this session allows traders to react to overnight news and global events.

  Prices may exhibit heightened volatility during this period, with stocks sometimes showing significant deviations from their previous close. While pre-market sessions offer the allure of early entry into emerging trends, they come with caveats.

  The reduced trading volume can lead to less liquidity, resulting in wider bid-ask spreads. Consequently, traders might find it challenging to execute orders at desirable prices. Additionally, the limited flow of information and the propensity for emotional trading decisions can create misleading price movements.

• The Opening Bell (9:30am ET - 10:30am ET): The stock market's official opening at 9:30 am ET, often referred to as "The Opening Bell”, ushers in a flurry of activity. During this time, traders and investors capitalize on the opportunities presented by overnight news and pre-market trends.

  The market's reaction to these developments typically generates substantial volume and volatility, presenting both significant risk and reward. However, the opening hour isn't without its drawbacks.

  The volatility can lead to substantial losses as quickly as gains, and the rapid fluctuations can make market analysis exceedingly difficult. Investors often need to act quickly and decisively, leaving little room for hesitation.

• Midday Trading (10:30am ET - 3:00pm ET): As the morning rush settles, the market transitions into midday trading. Between 12:00 pm and 2:00 pm, often referred to as the "lunchtime lull”, trading volume tends to dip, resulting in a quieter market with fewer opportunities for profit.

  The reduced volatility during this period, while less risky, can also mean less profit potential. It's a time when traders might choose to analyze the events of the morning sessions, plan strategies, or step back to avoid making hasty decisions influenced by boredom or frustration.

• Power Hour (3:00pm ET - 4:00pm ET): The final hour of the trading day, known as the "Power Hour”, is marked by a revitalization of activity. From 3:00 pm to 4:00 pm ET, trading volume and volatility typically spike as investors rush to close positions, adjust portfolios, or capitalize on day-long trends before the closing bell.

  This period, while bustling with opportunities, requires a solid understanding of market dynamics as events can unfold rapidly. Traders need to stay focused, disciplined, and ready to make swift decisions.

• After-Hours Trading (4:00pm ET - 8:00pm ET): Extending past the traditional market hours, after-hours trading uns from 4:00 pm until 8:00 pm ET. This session accommodates those who seek additional flexibility and provides the ability to respond to news events occurring outside regular trading hours. However, after-hours trading is not without its risks.

  Lower liquidity can lead to wider spreads and price volatility. Moreover, the relative lack of trading volume can result in higher risks and potential for manipulation. It's a playground best suited for experienced investors who understand the risks and have strategies to mitigate them.

• Overnight Trading Session (8:00pm ET - 8:00am ET): For the truly dedicated or those involved in international markets, the overnight trading session offers a less competitive arena, albeit with its challenges. This period experiences the lowest levels of liquidity, leading to potential price disparities and increased risk. Beginning traders should avoid trading this session.

  Understanding these sessions' ebb and flow and the associated risks is essential for crafting a robust trading strategy. By recognizing the opportunities and pitfalls each period presents, traders can significantly enhance their potential for success.

How days of the week influence stock trading

For day traders, not only do the hours matter, but the days of the week also hold significant sway over trading strategies and potential returns. Understanding these subtle yet impactful patterns can be instrumental in optimizing trade timing and capitalizing on market sentiment.

• Monday: A Challenging Start - Mondays can be particularly challenging for traders. Often, the accumulation of news and events over the weekend leads to reactionary trading and increased volatility.

  This phenomenon, historically known as the “Monday effect”, used to suggest a tendency for the market to drop at the start of the trading week, although its prominence has diminished over time. However, the remnants of this effect still influence market behavior, potentially creating entry points for discerning traders who can identify undervalued stocks amidst the reflexive market movements.

• Midweek Momentum: The Wednesday Factor - Contrary to the beginning of the week, Wednesdays are often viewed as a period of stability and can be a popular day for trading. By midweek, the market has typically digested the bulk of significant news, and knee-jerk reactions have leveled out.

  This stability can result in clearer trends and less erratic market behavior, providing traders with a more predictable environment for making informed decisions.

• Friday: Anticipating the Weekend Volatility - Fridays introduce a unique dynamic into trading. With the weekend looming, traders frequently close positions to avoid exposure to news that might break when the market is closed, leading to notable volatility.

  Fridays before long weekends can show positive returns, known as the "holiday effect", with markets buoyed by the prospect of a break from trading. However, relying solely on the day of the week is a strategy fraught with risk. Market conditions, breaking news, and global events play a critical role in stock prices and can quickly override weekly trends.

  For those looking to stay ahead in this dynamic environment, staying informed through reliable resources is key. Enhance your trading strategy by using tools like the best stock trading apps, which provide real-time updates and insights critical for making timely and informed decisions.

Seasonal trends and patterns

Seasonal fluctuations significantly impact stock market dynamics, offering traders valuable cues for optimizing trade timing. Several key periods throughout the year exemplify this.

• Earnings Seasons: Earnings seasons, occurring quarterly, notably in January, April, July, and October, are marked by intense market activity.

  These periods see companies disclosing their financial performance, often triggering substantial stock price movements. Traders keen on capitalizing on these shifts pay close attention to earnings reports, using them as a basis for informed trading decisions.

• The January Effect: Come January, the market often experiences a notable surge, especially in smaller caps' stocks. This uptick is attributed to investors re-engaging in the market following the December tax-driven sell-off.

  Some traders try to leverage this by purchasing stocks at lower prices in December with the intention of selling during the January high. However, the overall market trend for January is mixed.

• Summer Slowdown: Conversely, the summer months, particularly August, typically see a reduction in trading volume, known as the "summer slowdown". With many investors on vacation and companies usually not having major product releases, market movements slow-down and become less predictable.

• September: September is historically the worst month for stocks due to a variety of factors like summer ending, companies shifting priorities, and investment managers selling underperforming positions before presenting third quarter results.

• December: The Santa Claus rally phenomenon often sees stocks rise in December as investors are optimistic going into the new year. But, tax-loss selling can also put pressure on stocks.

  This lull poses increased risk due to reduced liquidity but can also present opportunities for those skilled enough to navigate the unpredictability.

While these seasonal patterns provide a framework, they’re not absolute. Successful trading requires a nuanced approach, considering these trends while staying attuned to real-time market conditions and global events. Ultimately, flexibility and informed decision-making are traders' best assets in a constantly evolving market landscape.

Trading around news events

The stock market is highly responsive to various news events, with economic indicators, earnings reports, geopolitical developments, and market news all holding substantial sway over stock movements.

Earnings reports are particularly influential as they provide insights into a company's financial health, often triggering immediate market reactions, either positive or negative, depending on the outcomes versus expectations.

Similarly, economic events like policy changes, interest rate decisions, or employment data releases can stir significant volatility, as they reflect the state of the economy, influencing investor confidence and market strategies.

Geopolitical events, such as elections, international disputes, or unexpected political moves, introduce an element of uncertainty, often leading to market caution or pullbacks. Moreover, market news, whether it concerns specific sectors or the broader economy, can prompt widespread buying or selling activity, depending on the perceived implications.

Navigating the market around these events requires finesse, as the accompanying volatility can be double-edged, presenting both opportunities for substantial gains and risks for equally significant losses. Traders must stay abreast of the news and exercise prudent judgment and risk management, especially in these high-stakes periods.

Best stock brokers 2024

1

9.4/10

Go to broker

eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.

Minimum deposit:

From $100

Review

The eToro broker was founded in 2007. The company promotes itself as a social trading platform working with traders from over 140 countries. The broker has several divisions operating under different jurisdictions and licensed by different regulators. For example, eToro (Europe) is licensed by the Cypriot regulator CySEC (109/10) and eToro (UK) is licensed by the British regulator FCA (583263). The broker also has a representative office in Australia and the USA.

Pros/Cons

•High level of reliability ensured by the licenses of respected regulatory authorities and participation in the compensation funds.

•Wide selection of assets quoted at stock exchanges in the UK, U.S., Australia and Asia.

•An opportunity to combine active trading with social trading and passive investing.

•Zero-fee trading of a number of stocks.

•Access to ready-made diversified asset portfolios with various risk levels.

•Provision of leverage, educational materials on various markets and user-friendly trading platforms that can run on any device.

•Zero fees for portfolio management, depositing funds and account maintenance.

•High minimum deposit for users of a number of countries.

•No live chat on the website for quick connection to customer support.

Study Review

2

9.2/10

Go to broker

Your capital is at risk.
Via eOption's secure website.

Minimum deposit:

$1

Review

The eOption broker (eoption.com) is an American stockbroker headquartered in Glenview, Illinois. It has been operating since 2007 and is a member of FINRA (CRD#: 7297/SEC#: 8-21765) and SIPC. It specializes in options trading and also acts as an intermediary in trades involving the popular securities classes. The company offers low trading commissions, super-fast execution of orders, and modern platforms with an advanced set of analytical tools. In 2020-2021, eOption was recognized as the best options broker by several resources such as Investopedia, The Tokenist, Benzinga, Investormint, and NerdWallet.

Pros/Cons

•Low commissions for options trading — $0.10 per contract plus $1.99 per trade.

•No minimum deposit requirements for cash trading accounts opened by US residents.

•FINRA membership and the protection of clients’ funds are available through Securities Investor Protection Corporation (SIPC).

•Access to professional trading platforms such as DAS and Sterling Trader Pro are developed by third-party software developers for the proprietary eOption terminal.

•An affiliate program with high rewards.

•Compensation for commissions for funds or assets from other brokerage firms and institutions transfer.

•Prompt support by phone and online chat in the trading platform during company business hours.

•The narrow range of choice of investment solutions to generate passive income.

•You cannot trade Pink Sheet and Bulletin Board stocks.

•There is no online chat on the company's website.

Study Review