Best Time(s) of Day to Day Trade the Stock Market
Trade during these hours when trading stocks or stock index futures
In day trading less is more. Day trading two to three hours a day is better for most traders than trading the entire day. There are a couple reasons for this.
Mainly, there are specific hours, discussed below, which provide the greatest opportunity for day trading. By day trading only during these hours traders maximize efficiency. Trading all day takes up more time than needed, for very little extra reward.
In many cases, even professional day traders tend to lose money outside of these ideal trading hours.
Secondly, day trading requires discipline and focus, both of which are like a muscle. Overwork it and the "muscle" gives out. Trading two to three hours keeps you on your game, and won't likely lead to mental fatigue which will negatively affect your trading. Trying to trade six or seven hours may drain a trader mentally, making them more susceptible to mistakes. Of course everyone has different focus and discipline levels. Some traders may be able trade all day, but most will do better by only trading during the few hours that are best for day trading.
Now that you know trading only two to three hours is more efficient, will likely make you more money than trading longer, and leave you with more mental energy, here are the few hours of the day to focus on when day trading stocks or stock index futures.
The First One to Two Hours
For many day traders, trading the first one to two hours the stock is open is all they need. The first hour the stock market is open is the most volatile and provides the most opportunity. While it sounds harsh, professional traders know there is a lot of "dumb money" flowing at this time.
Dumb money is created by people making transactions based on what they read in the newspapers or saw on TV the night before. The information these people are acting on is typically old news (see Why Fundamentals Have No Place in Day Trading). This often creates sharp price movements back and forth, as dumb money flows in pushing a stock (or the index) one way, and professional traders take advantage of the great price, pushing it back the other.
New day traders are often told not to trade for the first 15 minutes of the day. That may be true for very new traders, but for seasoned day traders that first 15 minutes is a gold mine, usually offering some of the biggest trades of the day on the initial trends.
If day trading stocks, 9:30 to 10:30 AM EST is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time--a great and efficient combination. Extend it out to 11:30 AM EST if you want another hour of trading. A lot of professional day traders stop trading around 11:30 AM EST, as that is when volatility and volume tend to taper off. Once that happens, trades take longer and moves are smaller with less volume--not a good combination for day trading.
If day trading index futures (such as S&P 500 E-Minis (ES), or an actively traded index ETF such as the S&P 500 SPDR (SPY)), you can be begin trading as early as 8:30 AM (pre-market) and then begin tapering offer around 10:30 AM. This provides a solid two hours of trading, usually with a lot of great profit potential. As with stocks, trading can continue up to 11:30 AM EST, but only if the market is still providing opportunities to capitalize the trading strategies being used.
The Last Hour (Optional)
Many day traders only trade the morning session. Though many also trade the last hour, from 3:00 to 4:00 PM EST. The trader has had a long break since the morning session allowing them to regroup and regain their focus.
When looking at common intra-day stock market patterns, the last hour can be like the first: full of bigger moves and sharp reversals.
Like the first hour, many amateur traders jump in for the last hour, buying or selling based on what has happened so far in the day. "Dumb money" is once again floating around (although not as much as the morning) ready to be scooped up by more experienced money managers and day traders.
The closing auctions can also drive prices in the last several minutes of trading, causing big moves which leave amateur traders questioning what happened (see NYSE and NASDAQ closing auction info).
Final Word On Best Times to Day Trade the Stock Market
Based on these parameters, there is little need to day trade for more than four hours a day (8:30 to 11:30 AM and 3:00 to 4:00 PM EST).
If only picking one hour to trade, 9:30 to 10:30 AM EST typically provides the most opportunity.
Pre-market trading before the official 9:30 AM open is not for everyone, so if you only trade after the opening belll then your trading day maxes out at about three hours.
The goal is to maximize gains in the shortest amount to time. Trade for two to three hours and you'll likely find you perform better than if you traded all day. The reason is two fold: the biggest and fastest moves occur during the hours above, maximizing efficiency. Also, the longer you trade the more mentally fatigued you become, increasing the chances of making mistakes and losing money.
Less is more. Establish the trading hours that work best with your strategies (or build a strategy around a specific time of day), and then stick to it.