In day trading, the trader may be in a transaction for two hours or for three minutes. Time can be the trader's friend or it can be an enemy. Day trading tips related to time or day provide guidance in how to interpret the market with regard to time.
Since the day trader closes out all positions at the end of the day (sells long positions, buy short positions), it is necessary to pay attention to patterns that occur within the day. Certain hours of the day are generally better for day trading; some tend to be better for short or long positions. It is important for every day trader to have an understanding of the usual patterns. Of course, no pattern is set in stone. Nothing is set in stone when it comes to the stock market!
Best and Worst Day Trading Days
These statements reflect the knowledge of trading patterns that is achieved through experience. However, it is possible also to learn from the experience of others. Jack Broz, Tom Busby, and Jerry Simmons are experienced traders who have shared their day trading tips regarding days and times with Suite 101, via personal interviews.
- Generally, after a major holiday the afternoon session is much more consistent than the morning session.
- Mondays, particularly Monday mornings, usually are not good days to trade since the market is "digesting" the weekend trading and news events (Busby).
- Friday afternoon is a poor day to trade because volume is low (many traders have already left for the weekend).
- Contract rollover days, which occur once every three months (futures and options are traded with quarterly expirations), are bad days to trade.
- The afternoon session prior to rollover is also risky.
- Tuesday, Wednesday, and Thursday are usually good day trading days, unless there is an announcement from the Federal Reserve or a major earnings statement from a key company (Jerry Simmons). Thursdays are often range expansion days.
Best and Worst Day Trading Times
- According to Larry Levin (secretsoftraders.com), the best time for day trading is 9:30 to 11 am ET, plus the last hour of the day.
- However, not all traders agree with this day trading tip. Jerry Simmons says not to trade during the first 10-15 minutes, because the market needs time to establish a trend or a continuation.
- Similarly, Saul Shaoul also gives advice that is opposite to Larry Levin; he says do not trade equities during the last hour because there is a great deal of computer-generated trading at that time.
- It is up to the individual day trader to take these opinions for what they are- interpretations of day trading pattens- not absolute fact.
- Avoid taking trades from 12 - 2 ET because floor traders at the exchanges often take lunch at this time and volume decreases, leaving the market unsteady for day traders..
More Time-Related Day Trading Tips
- According to DTI (Diversified Trading Institute) and Tom Busby, 4:30 pm and 7 am ET are key times for the DAX (German exchange). The 7 am price of the Dax is an important pivot point to judge the sentiments of the market (either bullish or bearish). This is and important day trading tip even for those who do not trade the DAX.
- At 4:30 am ET the Asian markets transfer control to the European markets.
- European markets transfer to the American markets at 9:30.
- The transfer to California influence (east coast to west coast) occurs at 1:30 pm.
- If Friday is a down day, the odds favor a down day on Monday.
- Jack Broz states that after the bonds close at 2 pm, many floor traders leave, so the rest of the day is not good for trading due to the low volume.
Past experience has led day traders to advise beginners concerning best and worst days and times to trade. Of course, past experience is no guarantee of future results. For this reason, no absolute statements can be made about days and times. One can only deal with the odds.
This article is for informational purposes only. It is not meant to give trading advice or to endorse specific trading products or sources. Investments should be made only after consultation with a professional, with the knowledge that investments can lose money.
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