Stock traders rely on short-term price movements to make profits, knowing the best time to buy stocks throughout the trading day can help active traders create and implement a more successful trading strategy.
In an article published by the American magazine "Forbes", writer E. Napolitano says that stock prices fluctuate throughout the trading day based on the state of the market, and a satisfactory earnings report may raise the stock price, which boosts investor demand once the earnings statement drops.
Experienced traders know that certain times of the trading day present better buying and selling opportunities than others.
Below, the author reviews the main characteristics of each part of the trading day, and the best times to buy or sell stocks.
Stock market opening
Professional traders know that the best times of the day to buy and sell stocks is when the stock market opens in the morning, and stock prices usually experience dramatic movements right after the open, but two of the most common causes of price volatility at this time are:
Breaking news:
News after the closing bell the previous day often stimulates after-hours trading.
These trades are settled after the opening, which can result in significant gains or losses in stock prices.
Morning headlines:
Similar to the evening news, new headlines before the opening bell can lead to a lot of trading before entering the market, with similar effects to breaking news.
Hours after midday
In this period, price movements and trading volume tend to stabilize after the morning chaos, and company news released during or after noon hours rarely leads to noticeable fluctuations after the opening, as traders do not usually have many profit opportunities.
Market closing hours
The last hour of the trading day brings a flurry of activity, the 3 to 4 pm hours provide plenty of price action, and traders often find that the hour before the market closes brings inexperienced investors back to the market where they are making trades based on the news of the day.
As a result, more experienced traders can take advantage of the bad timing of inexperienced traders.
Best day of the week to buy stocks
Investment advisor Dan Casey says Mondays offer some of the best conditions for buying and selling stocks, due to the long lag time between trading opportunities where news can affect certain stocks or industries.
In fact, a lot can happen that can cause a stock price to go up or down between the closing bell on Friday and the opening bell on Monday, so Monday is often seen by seasoned traders as the best day of the week to buy and sell stocks.
What does "buy at the lowest price" mean?
The author explains that traders are often willing to deposit a small portion of the value of a traded stock, often less than the shares they previously purchased, and are willing to wait for the right time to get a deal on more shares.
When a stock drops from its high due to company news or market action and inexperienced investors scramble to sell, experienced traders may take the opportunity to collect shares. This strategy is called “buy low,” which helps traders lower the average price paid for all the shares they own. In the company.
The writer shows that while it is not a strategy that all traders use, it can be useful for traders looking to increase their long-term returns.
You can follow this method at the best times of the day or week to buy stocks.
4 tips to help navigate the best times to buy stocks:
The writer says that these four tips can help you form a trading strategy to make better use of market volatility:
Define your goals:
Decide what you want to achieve before you start trading.
Your goal could be a certain rate of return, a certain dollar amount of earnings, or even a better understanding of a particular market segment.
Consult a tax professional:
When you are an active trader in a taxable account, you will be subject to short-term capital gains taxes, which will affect your net returns.
A little tax knowledge can help you avoid costly trading mistakes.
Know your limits:
It's important to have rules for dealing with losses, so you don't jeopardize your other financial goals.
Diversify your investments:
You don't want your entire portfolio to be turbulent during active trading hours.
Diversification can help you find gains even when entire sectors are in downturn.
The writer stresses that while there are better times to buy stocks, most investors are more likely to stick to a long-term buying strategy rather than schedule market strategies that are best left to professional traders.