Like many tough decisions traders would have to make in their beginning stages of trading, choosing a time of day to trade can be a pretty difficult one.
What type of personality do you have?
Do you handle high stress situations well? Or are you more laid back?
Quick with your fingers? Do you naturally wake up early, or do you wake up later in the afternoon?
I am going to go through each option of time frames for trading and mention what type benefits each of them have.
Pre-Market: 4:00 Am – – 9:30 Am
Most people don’t consider this a real time frame to trade in particular because of the decreased activity. The stock market opens at 9:30 Am Eastern Standard Time so most of the volume comes in after that.
However, what I have noticed is that if you can catch breaking news early on, then you can kind of make trading pre-market your niche. The majority of people don’t do this, but i know enough to know its “a thing”.
This requires a broker that will allow you trade pre-market in the first place, as some brokers don’t allow trading until official market hours (9:30Am EST).
The broker I use allows to trade as early as 4 AM EST and as late 8 PM EST After Hours (Post-Market). This is extremely beneficial not only for trading pre-market, but in case you want to get out of a position late or early in the day for some reason.
There is also the benefit of getting in earlier than the rest of the crowd, especially on good news. How many times have you seen a stock have an insane gap up,but most up that gap up happened during pre-market?
The reason they have a gap up is because there are traders pre-market buying.
One of the benefits of trading pre-market is that, in my opinion, stocks have a bigger capability of running higher.
I have yet to see a trading halt in pre-market, so this makes it easier for those huge run ups to occur. Also because there is less volume overall in pre-market, if the consensus is that this is a buy, it causes the stock to skyrocket a lot quicker because there are not that much sellers yet.
Now I would never consider using big size during pre-market because the price can fluctuate a little too much.
9:30 AM –11:00 / 11:30 AM Regular Hours
This is the time frame that most traders choose to be active strictly due to the amount of volatility that occurs.
This time frame is the most active during the whole day. More specifically the first 15 minutes after 9:30 Am. After 11:00 Am/11:30 Am there tends me be less volume because traders start trading less, taking off positions, waiting through positions, or going out for lunch.
Trading during this time means that the biggest moves usually happen during this window, so traders are desperate to take advantage.
Another added benefit is that the increase volatility makes it easier for traders with bigger size to enter and exit positions smoothly.
Like I said in the pre-market section, you can’t really use huge size during pre-market (most of the time).
2:30 PM – 4:00 PM “Power Hour”
This basically heading towards market close, and traders start to log back onto there computers and see what they can get before for a quick scalp or for an overnight position.
Also, the added anticipation of knowing that so many other traders are becoming eager to find another scalp gives an extra urgency to this time frame and cause some pretty decent percent gainers to occur as it gets closer to market close.
This time frame one that I would more recommend for swing traders, as its the best time to see which stocks are finishing strong, which ones are finishing weak, and how that may affect the open the next trading day.
No Time Of Day At All??
I also want tot remind traders that you may not have to choose any specific time frame and stock with it depending on what type of trader you are.
For example, if you are a swing trader, you could be entering positions during power hour, and exiting them during pre-market.
Or even entering during regular hours, and adding more towards power hour. It really depends on what type of trader you are.
However if you primarily a day trader, it is beneficial that you pick a primary time frame that you are most comfortable with. God Bless.