Stock markets are dynamic and offer exhilarating opportunities for day traders. Quite simply, day traders buy and sell shares of various companies that are listed on stock markets. The ability to trade on company events and news, or to short share prices, means traders can still make profits.
The allure of stock markets for day traders is obvious: a chance to make money by buying and selling shares of some of the most famous companies in the world, from Tesla and Alibaba, to Google and Amazon. Plus, day traders have a number of huge stock market indices to choose from, including the Dow Jones Industrial Average, Nasdaq Composite, and Standard & Poor’s 500, Hang-Seng, FTSE 100, and Dax 30.
Due to the popularity of day trading, those willing to give it a try can also take advantage of the numerous stock trading resources available online, from PDFs and books to live screeners, forums, and blogs. Despite trading with all these resources on your side, major stock markets have fierce competition which is why the time of day when a trade is made is a crucial consideration for traders.
You want to become a day trader to make money and work from the comfort of your home, and be your own boss. Therefore, you should not only take into consideration how much capital you have to trade with and which stocks you are interested in, but also the best time to physically place trades.
U.S. stock markets officially open at 9:30 and close at 4:00 p.m. Eastern Time. Traders can also place trades in Pre-Market (4:00 to 9:30 a.m. ET) and After-Hours sessions (4:00 to 8:00 p.m. ET). However, both sessions tend to offer inferior prices and less liquidity which is why many day traders tend to shy away from them.
So what are the best hours of the day to place short-term trades? Well, there isn’t really “a best time” of the day to buy or sell stocks, but there are certain hours that offer amazing opportunities for day traders.
9:30 to 10:30 a.m. ET
If you are a day trader, 9:30 to 10:30 a.m. ET is considered the best time of the day to buy or sell stocks, and probably when you will end up seeing the bulk of your gains. Placing trades during the first of hour of the regular trading session offers the most volatility and opportunities. Volatility is the key ingredient for successful trading. The stock market has to move for day traders to make money.
As a day trader, you have to do your research before the regular market session starts by getting up early. The biggest moves with the highest possible returns in a short period often happen from 9:30 and 10:30 a.m. ET. Many professional day traders stop trading around 11:30 a.m. because that is when volume and volatility begin to fall.
11:00 a.m. to 2:00 p.m. ET
The worst time to make profitable trades is between 11 a.m. and 2 p.m., when the stock market starts trading slower. This happens because most traders and other market participants are usually out to lunch. Moves are smaller with low volume, something no day trader wants. Therefore, it is not an ideal time to find great setups because they can crumble quickly.
3:00 to 4:00 p.m. ET
Although many day traders only place trades during the first hour of regular trading, some prefer to from 3 to 4 p.m. ET – the last hour of the day. A lot of big activity including sharp reversals, tend to happen during this hour and begin to build up until the close. It is possible to make huge profits at this hour because closing auctions can move stock prices right at the end of the regular session.
These suggestions as to the ideal hours of the day to trade stocks are generalizations, of course. Anomalies and exceptions abound, depending on changing market conditions and news events. The closest thing to a fast and hard rule is that 9:30-10:30 a.m. and 3:00-4:00 p.m. are the busiest hours, offering the most opportunities. But even so, many day traders still make money in the other hours, as well.