When are the best times of the day to trade?

If you’ve decided to trade the stock market, you need to know when the best times of the day are, as this will help you take advantage of the best opportunities, as well as protect your trading capital against wild price movements. So, let’s dive right in!

Premarket trading

While most people think that the markets run from 9:30am to 4pm (the hours might depend on where you are in the world and the kinds of markets you trade), there are great trading opportunities to take advantage of before the opening bell, if you understand premarket movers.

Of course, premarket trading is risky because prices are quite volatile, but if you know how to exploit this volatility and protect your trading capital, you might find it worth integrating premarket trading into your strategy.

Trading the open

The market open often offers the biggest market moves, as it considers all news and trading orders that have accumulated since the closing bell of the previous day. The first hours of the trading day are usually the most volatile, but this is where opportunity lies.

It isn’t uncommon to say that “dumb money” (an expression used to describe most retail investors/traders) flows at that time of the day. Acting on easily accessible information, many retail traders decide to enter the market at that time without realizing what’s actually going on, or that the information they acted upon is already outdated.

Trading the close

As most market action happens at the open and the close, the end of a trading day is also a great time to make money if you use the right strategies. Many traders believe that in the last hours of a trading session, the biggest price movements and trading volumes happen.

Day traders close their positions to avoid leaving their positions open overnight. It also seems that there is less slippage and market noise during this period, and that some companies wait for the last hours of the day to release news.

After-hours trading

Some brokers also allow you to do after-hours trading, which lets you trade outside the regular market hours after the closing bell. The ability to trade during this period after-market hours is great, as you can quickly and immediately react to breaking news.

It is a great option for those wanting to benefit from a flexible trading environment. However, it is usually more volatile, trading volume is quite low and trading costs are higher, as there is less active market action.

News trading

News releases are another great time of the day to trade the markets, as they can trigger large price movements. You will have to follow the financial and economic calendar to know when economic statistics, or decisions about monetary policy, are due and be prepared to take advantage of market movements.

News trading is an active and risky trading strategy, as price fluctuations can be wild and sudden, but you can take advantage of this volatility to make quick profits.

Bottom line

Premarket trading, trading at the open and the close, after-hours trading, as well as news trading are good strategies to take advantage of volatile moments during the day to trade, as they offer opportunities to be in the action and take advantage of it. However, it is important to really understand what drives prices up or down, and to always follow your trading plan.

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