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Without question, the best time for trading is the first and last half hour the market is open. Those two half hours of every day are packed with tradable action. The primary ingredient for successful trading is volatility. The market has to move for traders to make money. During these times, the spread between bid and ask prices is at its largest , leaving more of an opening for traders. Many skilled traders stop trading at around They return for the last hour of trading when volatility picks up once again.
This adjustment period offers traders a window of opportunity to capitalize on the momentum that certain stocks will have following news. These stocks are typically some of the largest movers when the market opens. The uptick in volatility during the closing hour also makes sense. Traders who want to exit positions prior to the end of the day will be selling. Traders looking to take a long or short position in a stock ahead of an after-hours catalyst like an earnings report will also be trading in the last few minutes of the day.
In addition, stocks that have been big movers throughout the trading day often gain momentum right before the closing bell or reverse direction sharply due to profit-taking. Finally, portfolio rebalancing also typically takes place at the end of the day, although it is more prevalent at the end of the week, month or quarter than on a typical weekday. Professional and institutional traders are well aware that the first and last half hours of the trading day are the best times to trade, so there are plenty of sharks in the water.
These trading hours offer experienced traders the best opportunity to make money trading, but they can also be a dangerous time for inexperienced traders. Novice traders may want to consider starting off by trading in the middle of the day when there is less market volatility and mistakes and learning experiences can typically be made at a lower cost.
This article is provided for educational purposes only and is not considered to be a recommendation or endorsement of any trading strategy. The author is not affiliated with Lightspeed Trading and the content and perspective is solely attributed to the author. Navigating Taxes as an Active Trader. Large Cap Momentum Trading.
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