How to effectively trade the first and last hour?
Markets such as stocks and futures, unlike the currency markets, operate only for the specified period of time. Trading is conducted during the regular business hours. Therefore, when the market opens and closes the first hour and the last hour of trading will see a lot of activity as traders open and square off positions by the close of business day.
How do you trade in the first hour?
The opening hour of a trading session is often found to offer lucrative trading opportunities. Traders prefer to trade the first hour of the trading session because the market are very volatile. If you have ever come home from work and used your evening hours to research stocks and place trade orders for the next day, you and others like you are the reason for the first hour of high volume. As soon as the stock market opens, a rush of programmed trades enter the market and are quickly filled.
Whithin the first 5-minutes you will see a number of spikes in both price and volume as stocks gap up or down from the previous day’s close. This will often be driven by some sort of earnings announcement or pre-market news. One can expect to make significant profits by just spending few hours a day trading the first hour of the opening session. Although there are many opportunities to exploit during the first 60 minutes, it can be equally risky.
To be really successful in trading the first hour of market open, traders need to be adequately prepared. You should first begin by looking at the fundamental landscape of the markets that your trading. You should always begin by understanding how the markets closed the previous day. Check if there are any important news events that influence the markets. Look for any news releases that might impact the markets during the first hour of trading. You can focus on things such as earnings report from companies, any news that relates to regulations and so on depending on the type of sectors that you’re interested to trade. Typically, economic news releases are scheduled to be released during the first half of the trading day.
What happens in the last hour of the stock market?
Many day traders try to avoid leaving their trades open overnight. Therefore, they usually exit their trades before the end of the day. 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.
A WORD OF WARNING
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.
Don’t try to fight the market so you can tell your family members and friends you were trading all day. you are in the business of making money, not working long hours
