Best Time(s) of Day, Week, and Month to Trade Stocks

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Best Time(s) of Day, Week, and Month to Trade Stocks

What Are the Best Times to Trade Stocks?

Trading, unlike long-term investment, often has a short-term concentration. A trader buys a stock not to keep for long-term growth, but for a reasonably rapid turnaround, sometimes within a few days, a week, a month, or even a quarter.

Day trading, as the name indicates, has one of the smallest time periods of all. The analysis of a day trader may be broken down into hours, minutes, and even seconds—and the time of day when a transaction is executed might be a significant component to consider.

Is there a good time of week to purchase stocks? Or is it the greatest day to sell stock? Is there an optimum time of year to purchase stocks? What about the optimum month to purchase or sell stocks?

We’ll teach you how to schedule trading choices based on daily, weekly, and monthly patterns in this post.

Key Takeaways

  • Traders often use holding periods to determine when to enter and quit deals.
  • As the name suggests, day trading has the smallest time period, with deals broken down into hours, minutes, and even seconds. When a deal is done, the time of day might be a crucial component to consider.
  • The closest thing to a hard-and-fast rule is that the opening and final hours of a trading day are the busiest, with the greatest opportunities, while the middle of the day is usually the calmest and most steady.
  • Some traders assume that some days provide statistically greater profits than others, although there is no evidence for such a market-wide impact in the long term.

Best Times of Day to Buy or Sell Stocks

Market volumes and prices might soar first thing in the morning. During the opening hours, the market considers all of the events and news releases that have occurred since the previous closing bell, which leads to price volatility. A good trader may be able to identify the suitable patterns and profit quickly, while a less skilled trader may incur significant losses as a consequence. If you’re new to trading, you should avoid trading during these risky hours, or at least within the first hour.

However, for experienced day traders, the first 15 minutes after the opening bell are ideal time, generally providing some of the day’s largest transactions on the early trends.

The hours of operation are 9:30 a.m. to 10:30 a.m. The Eastern time (ET) period is often one of the finest hours of the day for day trading, with the largest changes occurring in the smallest amount of time. Many skilled day traders quit trading about 11:30 a.m. since volatility and volume tend to decrease at that time. When this occurs, transactions take longer to complete and changes are smaller and with less volume.

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If you are trading index futures, such as S&P 500 E-Minis, or an actively traded index exchange-traded fund (ETF), such as the S&P 500 SPDR (SPY), you may start trading as early as 8:30 a.m. (premarket) and start tapering down about 10:30 a.m. Trading in equities may continue until 11:30 a.m., but only if the market is still offering possibilities.

The middle of the trading day is often the calmest and most steady time of day. People are waiting for further information to be released at this time. Because the majority of the day’s news has already been worked into stock prices, many are looking to see where the market will go for the rest of the day.

Because prices are typically constant at this time, it is a good time for a newbie to enter trades because the activity is slower and the returns may be more predictable.

Volatility and volume rise again in the last hours of trade. Indeed, regular intraday stock market patterns reveal that the final hour might be similar to the first—sharp reversals and large swings, particularly in the last few minutes of trading. Day traders are often seeking to finish out their positions between 3 p.m. and 4 p.m. ET, or they may be hoping to join a late-day surge in the hope that the momentum will continue over into the following trading day.

Best Day of the Week to Buy Stocks

Some assume that some days provide consistently greater returns than others, although there is very little evidence for such a market-wide impact in the long term.

People still feel that the first day of the workweek is the finest. The Monday effect or the weekend effect is what it’s termed. According to traders, the stock market has a propensity to fall on Mondays. Some believe this is because a large volume of unpleasant news is often published on the weekend. Others refer to investors’ pessimistic attitude of having to return to work, which was particularly noticeable during the early hours of Monday trading.

For whatever reason, the Monday impact has almost vanished. The data below indicates that although Mondays had negative returns on average for the S&P 500 in 2018, the impact was quite tiny.

Nonetheless, if you’re going to purchase equities, you could be better off doing so on a Monday rather than any other day of the week, and perhaps snagging some bargains in the process.

Best Day of the Week to Sell Stocks

If Monday is the greatest day of the week to purchase stocks, Friday is the ideal day to sell them—before they fall on Monday. If you want to short sell, Friday could be the ideal day to start (if stocks are priced higher on Friday), and Monday might be the best day to close your short.

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Fridays on the eve of three-day weekends are exceptionally strong in the United States. Stock markets tend to climb ahead of these acknowledged holidays due to typically good attitudes before a lengthy holiday weekend.

Best Month to Buy Stocks

Markets often produce good returns at the turn of the year and over the summer months. The figure below shows the monthly average returns for the S&P 500 from 1950 to 2017:

The January effect is a well-known phenomenon. According to Jeremy J. Siegel’s “Companies for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies,” at the start of a new year, investors return to equity markets with a fury, driving up prices—particularly of small-cap and value stocks. However, once knowledge about such possible anomalies spreads across the market, the impacts tend to fade.

So, in terms of seasonality, the end of December has shown to be a good time to purchase small caps or value stocks in order to be ready for the following month’s surge. Another benefit is that many investors begin to sell stocks in bulk towards the end of the year, particularly those that have decreased in value, in order to claim capital losses on their tax returns.

So, once again, the last trading days of the year might provide some bargains, even though traditionally, a sell-off occurs in December—and with it a possible loss in investment value for new investors—which is a consideration to keep in mind after a possibly large January impact.

Best Month to Sell Stocks

September is usually seen as a slow month. In 1907, 1929, and 1987, October also saw record decreases of 19.7% and 21.5%. These events herald the beginning of the Panic of 1907, the Great Depression, and Black Monday. As a consequence, some traders feel that the months of September and October are ideal for selling equities.

The September impact emphasizes historically low returns in the ninth month of the year, which may be supported by institutional investors closing out their third-quarter holdings. In fact, according to the figure above showing monthly average returns, September is the poorest month of the year.

For other investors, the October impact is also noticeable. Despite the fact that October has traditionally been a favorable month, many of the biggest market collapses have happened in this month. While September may be a weaker month on average than October, you may want to sell in September to avoid the above-average volatility that October might experience.

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Best Date of the Month

There is no particular day of the month that is always the best time to purchase or sell. However, stocks have a propensity to climb near the end of the month. This trend is mostly due to fresh money flows directed into mutual funds at the start of each month.

Furthermore, fund managers try to make their balance sheets seem nice at the end of each quarter by purchasing companies that performed well during that quarter. In the middle of the month, stock prices tend to dip.

A trader may gain by scheduling stock purchases at the middle of the month—say, the 10th to the 15th. The ideal time to sell equities is generally five days before the end of the month.

Are There Really Best Times to Buy or Sell Stocks?

Historically, some days or months have been better or worse for stocks. These so-called market oddities called into question efficient market theory. However, research indicates that when these anomalies grew more well recognized and trade got more automated, they basically vanished.

Is There a Way to Trade Stocks Over the Weekend?

Not at all. Major stock exchanges shut on Friday afternoons, however after-hours trading may continue until Friday evening. Saturday and Sunday, on the other hand, are often unavailable to most dealers.

Is There a General Rule for Timing Trades?

The closest thing to a strict rule is that the start and end hours of a trading day are the busiest, with the greatest chances. Even yet, many traders are lucrative during the off-season.

The Bottom Line

Of course, these ideas for the best time of day to trade stocks, the best day of the week to buy or sell stocks, and the best month to purchase or sell stocks are broad generalizations. Depending on news events and shifting market circumstances, there are several exceptions and oddities.

Nonetheless, scholarly data shows that any market timing patterns that may regularly provide anomalous returns are often short-lived, since these opportunities are swiftly arbitraged away and markets become more efficient as traders and investors learn about the patterns.

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