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Market magic hour: When to strike for maximum impact

Market magic hour: When to strike for maximum impact
Nemanja Curcic

Stocks are a relatively volatile financial instrument, and their prices tend to fluctuate during the day. As such, active traders often utilize these short-term price movements to get a profit. However, knowing the right moment to buy and sell stocks can benefit not only day traders but every participant in the stock market. Today’s article will discuss the market magic hour or the best time to seal the deal for maximum impact.

Stock market shifts

Data and press releases, such as earnings reports, important news, regulatory changes, etc., are key factors contributing to stock prices. An FDA drug approval will drive the stock price of a pharmaceutical company up. Conversely, a lawsuit against a business will likely initiate a stock sell-off and drive its price down.

While most investors conform to such market shifts, expert traders aim to anticipate and use these trends to their advantage. Aiming for maximum impact, they operate during the market magic hour, during which they will get the best price for their desired trade.

What is the best day time to trade?

Stock exchanges like the NYSE and NASDAQ are typically open on a fixed schedule, called trading hours. The first trading hour is when prices are most volatile and move more, and this is generally when you want to execute your trading deals.

The best hour to trade on the stock market is the opening hour, or the first trading hour of the stock exchange.

The reasoning behind this is that news and announcements released after the closing hours of the previous day initiate trades that are settled after the market opens again. In other words, investors tend to trade immediately to benefit from the new data, driving significant swings in stock prices during the first hour.

Seasoned active stock traders know that the time after the market opens is the most chaotic, as novices rush to react to overnight or morning headlines. Therefore, the initial hour is a perfect opportunity to buy and sell, especially with the foreknowledge that the price tends to get steadier by midday.

By contrast, the afternoon is much less volatile than the morning, which means there is less opportunity to make a profit from shifts in stock price.

Which day is best to trade?

Using the same logic, Monday is the best day of the week to make deals in the stock market. As the exchanges remain closed on weekends, information that drives changes in stock demand piles up and simultaneously affects the stock market during the opening hour of the first day of the week.

What time does the stock market open and close?

Even without the time zone division, trading hours differ between various stock exchanges. Here’s a list of the most popular stock exchanges and their trading hours:

Stock exchangeTrading hours (local time)Trading hours (UTC)
New York Stock Exchange (NYSE)9:30 a.m. to 4:00 p.m. (EST)14:30 to 21:00
Nasdaq (NASDAQ)9:30 a.m. to 4:00 p.m. (EST)14:30 to 21:00
Euronext09:00 to 17:30 (CET)08:00 to 16:30
Shanghai Stock Exchange09:30 to 15:00 (CST)(break 11:30 to 13:00)01:30 to 07:30(break 03:30 to 05:00)
Tokyo Stock Exchange (TSE)09:00 to 15:00 (JST)(break 11:30 to 12:30)00:00 to 06:00(break 02:30 to 03:30)
London Stock Exchange (LSE)08:00 to 16:30 (GMT)08:00 to 16:30
Table 1: Popular stock exchanges and their trading hours

Instead of the best trading hour and timing the market

Despite the increased volatility of the initial trading hour, securing the deals in the morning alone does not make you a successful trader. Try combining it with these useful tips:

  • Utilize better price indicators: Trading in the first hour is more of a rule of thumb than an actual investing law. Consider using indicators such as moving averages to better track the fluctuations in the price;
  • Be prepared to lose: Even the best traders sometimes face inevitable losses. Never invest what you cannot afford to lose;
  • Form an investing strategy: You should set an objective and know what you want to achieve with the portfolio before investing. Consider the timetable, the amount of risk, and the potential returns of your investment. Once set, you should stick with your investing goals;
  • Diversify: Do not put all your eggs in one basket. Diversifying lets you manage risk more effectively and find gains even when a specific company or industry faces a downturn.

When is the best time to trade stocks – the bottom line

So, if you have ever wondered when the best time to trade stock is, the market magic hour is the opening hour of a trading day.

That said, not every bet made during the first hour has a positive outcome. The potential profit is higher due to increased volatility, but the opposite is true, and your losses will be a bit worse in the opening hour. Therefore, always stick to the fundamentals of investing: proper research, diversification, a solid investing strategy, and a plan B if the investment does not go through.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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