The first two and last two hours tend to be the best times to trade the stock market—the beginning and the end of the day. The first and last hours of the day are usually the most volatile as well, so they can be the best for more experienced traders.
The opening 9:30 a.m. to 10:30 a.m. Eastern time (ET) period is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time. A lot of professional day traders stop trading around 11:30 a.m. because that is when volatility and volume tend to taper off.
Risks and Dangers
During after-hours trading, there may be less trading volume for your stock, and it may be harder to convert shares to cash. Wide spreads: As noted above, a lower trading volume may result in a wide spread between the bid and ask prices.
Because relatively few people actually trade after the market closes, orders tend to build up overnight, and in a rising market, that will produce an upward price surge when the market opens. But during extended declines, overnight sell orders may cause prices to plummet when the market opens.
Night trading was not legal until 1999, when the Securities and Exchange Commission legalized it. If you have a computer and access to an electronic communications network or an after-hours exchange, you too can engage in night trades.
But after-hours trading both enhances the standard risks of the market and introduces additional risks. The major risks of after-hours trading are: Low liquidity. Trade volume is much lower after business hours, which means you won't be able to buy and sell as easily, and prices are more volatile.
Even though markets close overnight, prices still move between the time the market closes and opens. That's because buy and sell requests build up overnight, some select overnight trading occurs, and events that affect a specific company's stock can cause sudden changes in its perceived value.
Strategies which work better with less volatility, such as scalping or automatic trading programmes, will tend to favour night trading. For those looking for more volatility, the best forex pairs to trade at night are cross-pairs which involve an Asian-based currency such as the AUD/NZD, AUD/JPY or NZD/JPY.
For smaller companies, the market hours (post-open) are the best entry times to buy the stock. At this time, all the exchanges are quoting prices and traders have access to more shares. Traders hoping to make an intraday play can buy a stock they may want to close out at the end of the day.
The Nasdaq and other major stock exchanges have steadily augmented their trading hours to provide investors with more time to buy and sell securities. Electronic communication networks (ECNs) enable investors to trade stocks during aftermarket hours between 4:00 p.m. to 8:00 p.m.
Why Are Stock Prices More Volatile in After-Hours Trading? The number of participants in after-hours trading is a fraction of those during regular market hours. Fewer participants means lower trading volumes and liquidity, and hence, wider bid-ask spreads and more volatility.
The Monday effect has been attributed to the impact of short selling, the tendency of companies to release more negative news on a Friday night, and the decline in market optimism a number of traders experience over the weekend.
Generally, the more buyers and sellers are actively trading a stock, the narrower the spread will be. Because spreads tend to be wider during after-hours trading, you are likely to pay more for shares than during regular hours.
Stock turnover is generally lower and price movements less pronounced on the last trading day of week. Companies with bad news to report often take advantage of this slowdown by making their announcements on Fridays.
But historically, many studies have shown that prices typically drop on Mondays, making that often one of the best days to buy stocks. Friday, usually the last trading day before the Monday drops, is therefore one of the best days to sell.
Indian stock market trading hours start at 9:15 AM and end at 3:30 PM. However the Indian markets open between 9:00 a.m. and 9:15 a.m. for a pre-open market session. Pre-open market sessions had begun in India in 2010.
It is always better to strategically invest your time. A lot of research has suggested that the best time frame for intraday trading is usually between 9:30 am-10:30 am. If you are a beginner, it is always better that you observe the market for the first 15 minutes and then start trading.
Stock prices fall on Mondays, following a rise on the previous trading day (usually Friday).
Bonds have extended trading hours, and overnight trading can take place in stocks between 4 a.m. and 9:30 a.m. ET (when the exchanges open), and 4 p.m. (when the exchanges close) and 8 p.m. ET.
The overnight trading hours for NSE are from 3:45 p.m. to 8:57 a.m. For currency trading, you can place an AMO between 3:45 p.m. and 8:59 a.m. For trading derivatives such as future and options (commonly known as F&O), the overnight trading hours are between 3:45 p.m. and 9:10 a.m.
Day trading is essentially a play on the short-term volatility (or price movement) of a stock on any given day. Day traders buy a stock at one point during the day and then sell out of the position before the market closes.
If the price is lower than the closing price from yesterday, you know the stock market is probably going to open lower. If the price is higher than the closing price from yesterday, you know the stock market is probably going to open higher.
The development of after-hours trading (AHT) has had a major effect on the price of the stock between the closing and opening bells because it means that transactions are happening and shifting the prices of stocks even after-hours.