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Best Time of the Day to Buy Stocks

Though you might say, “I already knew that!” we’re going to put it right here again, anyway: trading is vastly different compared to long-term investing.

If you’re an investor, you can purchase an ETF, mutual fund, or any security and keep your funds for the long-term. If you’re a trader, however, you’ll pay keen attention to the precise time of day and purchase your funds during the times that are most advantageous to you.

What is the Best Time to Buy Stocks?

Your trading habits should be directly determined based on the type of trading you do. Knowing which category fits you best will help you determine when you should buy and sell.

  • Day traders: You buy and sell financial instruments (stocks, options, futures, currencies, etc.) within the same trading day. To be officially considered a day trader, all of your positions must be closed at the end of that trading day.
  • Traders: This definition can include several different types of traders, including high-frequency traders, pattern day traders, and stock traders. None of these types of traders practice day trading or buy-and-hold investing.
  • Investors: These individuals are simply individuals who commit money with the expectation of growth in the form of financial returns. Investors practice buy-and-hold investing.

Is it a Good Time to Buy Stocks?

During any given day, there are distinguished times when it’s best to buy and sell. Knowing when those times are can help you:

  1. Maximize your efficiency.
  2. Provide you with the best opportunity to make money.
  3. Hone the discipline you need to be a trader.
  4. Avoid mental fatigue of trying to trade all day long, all the time.

What Time Does the Stock Market Open and Close?

A trading session simply refers to the normal trading day and excludes trading that takes place before the opening bell or after the closing bell. The trading session does not include pre-market or extended hours trading.

What happens during any given day

A study by Thomson Reuters concluded that 58% of all volume on the NYSE occurs during the first and last hour of trading. Before we wrap it all up, let’s go through what typically happens during a trading day.

Morning

Normal trading begins at 9:30 a.m. EST, and a lot of traders trade the first hour of the trading day, till 10:30 a.m In the morning, market volumes and stock prices can be thoroughly volatile. (Lots of different types of news could have occurred anytime after the closing bell the day before.)

If you’re a brand new trader, it’s wise to avoid the first hour of the market open, but if you’re an experienced trader, trading early in the morning could net you some excellent opportunities.

It pays to be careful during the first five minutes of the trading day, however, as the market is still adjusting to any news it may have experienced, but you can capitalize on some of that news. According to Lightspeed, early in the trading day, traders can identify and target stocks that have made large pre-market moves, stocks mentioned in that morning’s headlines or stocks that are trending on social media.

These stocks are typically some of the largest movers when the market opens.

Afternoon

Market volatility really starts to slow down around 11 or 11:30 a.m. Volatility and volume tend to go down, so you’re not maximizing your returns during this part of the day.

End of the day

A lot of traders trade at the end of the day, around 3 to 4 p.m. EST, when volatility and volume increase just like at the beginning of the trading day. During this volatile time of the day, there are lots of opportunities, and big, fast moves can happen that run right up until 4 p.m., when the regular trading day ends.

Pre-market trading

It’s also possible to trade during the pre-market hours, between 4-9:30 a.m. instead of waiting until the 9:30 a.m. opening bell. The benefit to trading during the pre-market session is that a lot of companies will not release information about their company (i.e., a bad earnings report) during regular trading hours.

Therefore, if you need to sell your stock, you’ll be at an advantage to do so during the off hours.

Extended/after hours trading

It’s also possible to trade between 4 and 8 p.m., after the closing bell. While after-hours trading does present investing opportunities, the SEC warns traders about extended or after hours trading, which could include some disadvantages. These exact reasons have been pulled directly from the SEC’s website:

  • You cannot see or act on quotes
  • Lack of liquidity
  • Larger quote spreads
  • Price volatility
  • Uncertain prices
  • Bias toward limit orders
  • Competition with professional traders
  • Computer delay

Twenty-four hour trading, once thought of as the “next step,” never did end up taking off among traders. Traders, who are primarily interested in getting a good price, realized that the liquidity is just not there if they’re trading at 3 a.m. It’s a practice that has not been adopted as a possibility.

Research Your Trading Strategy

Be sure to do your own research, too: pore over financial statements, watch the news and do your own research. You can subscribe to analyst services for various companies that deeply research these companies and industries.  

Don’t forget to check out Benzinga’s markets and ratings information daily to help you with that research and to make some conclusions about your prospective trades. Based on these determinations, it’ll help you determine what time of the day you’ll want to trade.

Final Thoughts

The fact that most people know that the first and last half hours of the trading day are the best times to trade means that there are lots of crocodiles in the swamp. Experienced traders can make money, yes, but it might not be the safest time for novice traders.

It’s a really healthy consideration for novice traders to consider trading in the middle of the day when there is less volatility and mistakes can cost less money.

Want to test out your investing strategy? Check out Benzinga’s guides for to the best online stock brokers, the best portfolio trackers and the best stock research tools. Also, check out our guide on stock analysis.

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