Brian Caubarreaux & Associates

Why the morning hours are the best in trading

Why the morning hours are the best

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  •     As a result of the volatility of the first hour, traders have the greatest opportunity.
  •     The first trends that highlight the key trades are delivered in the morning.
  •     Quick profits can be made by experienced traders who can spot appropriate patterns.
  •     The largest movements within the shortest time are provided and this is "an efficient combination".

The last hour of trading

Majority of the day traders also trade in the last hour of the day i.e. 3.00 pm to 4.00 pm. This last hour of trading is the second most volatile hour of the day. The market closes at 4.00 p.m.; after that, liquidity dries up in almost all ETFs and stocks, except for the very active ones.

The last hour, also known as end-of-day trading, is popular with those who have difficulty trading during the day. At this time, traders have a long break since the morning session, which allows them to do so:

  •     Regroup
  •     Regain focus

Looking at the usual intraday stock market patterns, the last hour in it resembles the first hour; it is full of sharp reversals and bigger moves. Closed auctions direct prices right at the end of regular trading, an aspect that can lead to big gains as traders hope momentum carries over to the next trading day. The characteristics of the last hour are as follows:

  •     Price movements are more volatile
  •    Higher volume

It is essential to emphasise that volatility changes throughout the year. Two productive trading periods, separated by a slow period of trading decline, are characteristic of each calendar year. The information is useful in determining the best trading months.

January to May (winter-spring)

  •     Due to volatility, these are the most profitable months for trading
  •     Traders are busy and look forward to making profits before the summer stagnation sets in
  •     In reality, this time of year does not beat autumn, but it does mean more opportunities for traders to make profits

June to August (summer)

  •     These are the slowest months for traders
  •     Market volatility stabilises during the summer
  •     This happens as most traders take a well-deserved holiday during this period and make a comeback in September
  •     Analysts advise against trading at this time as volumes are smaller than normal
  •     Even though there are occasional moves, they are high risk and quite unpredictable
  •     The best strategy during summer is to try mini trends or trade with smaller trading ranges
  •     The summertime trading blues end on the first Monday in September, marking the rise in both seasonal and weekly volatility

September to mid-December (autumn)

  •     These are active and very volatile months
  •     As traders resume their trading activities after the summer, it is only natural that a boom occurs
  • resumes in other companies
  •     Volatility swings slow down from mid-December to the end of December

Why the difference?

Each holiday period signifies a drying up of trading volume, and the following months symbolise a refreshing return to trading.

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My conclusion: the periods should be taken into account in stock trading

From the above, the best time of day to buy stocks depends on the time of day and season. Anomalies and exceptions abound and depend on changing market conditions in Exness and news events. The closest you can come to a hard and fast rule is to assume that the last and first hours of a trading day are the busiest and offer the most opportunities.

Markets see lower trading volumes as the holiday season and major holidays approach. Such days are prone to abrupt fluctuations; for this reason, analysts recommend slowing down trading during this period.

Here are the key tips: 

  •     Most volume is generated after the stock market opens
  •     The first trading hours are to be preferred
  •     Avoid the midday period
  •     More volume comes from afternoon to evening
  •     Strong movements can occur shortly before the close
  •     This information applies to every exchange - you just have to convert the times (3:30 pm German time is the start of American trading).

Dad's Story