Trading is unlike investing, because you’re not buying and holding stocks, looking for a steady rise in the price over time.
When you’re trading, you’re looking for a quick move, and a quick profit.
Typically, you have a specific time frame in mind, whether it’s within a matter of minutes or a month. That has every trader trying to figure out the best time to trade the market.
Truthfully, whether there is a best time (or not) actually depends on your strategy and the time you could dedicate trading the markets. Here are some tips, however, for finding the best time for you to trade, and to avoid trading.
Best timing to trade or avoid
If you’re a new trader looking to buy stocks, you might want to shy away from trading the open at first. At the open of the market, volume tends to be high, and there is a high degree of price volatility, which can make it hard for beginners. Let the dust settle, which can take 30 minutes to an hour.
Once you become a consistently profitable trader, you can look for some patterns that work for you at the open, and can use that analysis to trade in the day’s early moments.
Check out how the market can whipsaw in the first hour of trading. Here’s the five-minute chart of the SPDR S&P 500 ETF (SPY).
For many new traders, the sweet spot might be for one to two hours after the open. At this point, prices tend to stabilize, and you can get an idea of the overall sentiment of the market. The price action is much slower, and the moves are a little more predictable.
Similar to the opening, volatility often picks up as closing nears. Again, it’s hard to pick a direction here, and the markets could whipsaw into the close. That in mind, if you’re new to trading, you might want to try to wrap up your trading day by 3 p.m. and avoid trading the final hour.
The idea in trading is to be as comfortable as possible with the environment, and new day traders who want to control as many variables as possible will be cautious at the open and close. Move to those times as your trading proves successful, when you can define the best time to trade as any time you have a good idea in current market conditions.
Keith Kern has been a full-time day-trader for 17 years; he moderates the Lightning Alerts chatroom at BiotechBreakouts.com.