For a novice trader in the stock market, one of the major challenges might be understanding the best time to sell and buy stocks. Experts of the stock market say it is better to spend two or three hours for stock trading rather than investing your entire day in buying and selling stocks. What many don’t know is when this optimum time of the day is. Certain hours offer the best opportunities for stock trading; on the flip side, trading all day will cost you more time, but the reward is merely appreciable.
The most suitable time to day trade is two hours right after the market opening, which is 9:30 am to 11:30 am in the United States. Another best time is during the market’s closing time, which is generally during the last hours of the day. In the US, the time ranges from 3 pm to 4 pm EST. With a proper plan of action, you can make better profits and buy shares during the optimal period.
The first hours, right after the stock market is open, are positively volatile. These hours offer the best buying and selling opportunities at the same time, and it is of high potential risk. It might sound difficult but what professional traders say is that, during this early hour, there is a large amount of “dumb money” flowing at that time. For the unaware, this so-called dumb money is the transactions carried out by people purely based on what they read on the news the last night. The information, in most cases, is old news, and the traders can push the price in a certain direction. The experienced and professional traders take advantage of these price movements and push back the overly priced or low-priced stock.
New-day traders will not initiate trade during the first fifteen minutes, which is notable advice for novice traders. But these first 15 minutes offer the most attractive opportunities for seasonal traders. During the beginning of a new trend, this period could offer the day’s biggest trade.
Most of us are looking forward to making big moves in a brief period. As pointed out earlier, the early hours of the stock market will be highly volatile. The professional traders will wrap up the trade by 11.30 am because the volatility and volume will begin to taper off by this time. The question that crosses your mind might be, “what happens while the volume is low”? When the volume is below a critical point, the traders are longer, but the moves are comparatively smaller.
What happens while trading during the last hour?
By the end of the day, which is by 3 to 4 pm, when the market closes, the traders will go for a long break. Looking at the typical stock market pattern, the market unveils opportunities just like it was during the morning hours. During that hour, the traders will be bombarded with a sharp reversal and bigger moves, and many armature traders will hop in during the first hour.
Best days and months to buy and sell in the stock market:
Monday afternoon is generally considered a good time to initiate a purchase; this is mainly because the market tends to have a severe drop at the start of a week. This pattern has been observed over the past couple of years. Market experts recommend Friday as a suitable day for trade. This is mainly because Monday is when the price dip happens. Acceding to the historical market, the prices tend to drop by September every year, and a month later, an appreciable price spike happens. The price spike is positive during October, and January marks the price spike again, especially for small-cap stocks.
Wrapping it up
As a beginner in the trading world, finding the ideal buying and selling time could be extremely challenging. It takes time to get in line with the stock market timing. Once you are familiar with the timings, half the problem is solved. To have better insight into the stock market behavior, it is best advised to look at the historical trends. You could have a vague idea of the market movements occurring week-to-week, month-to-month, or even year-to-year.