| |
You can engage in various stock trading strategies during any time of the day, but that does not mean you should actually trade at certain periods. It is vital for you to watch for how trades can take place at specific times. In particular, you need to look at the first hour of trading; 9:30 am Eastern is often the most important time of day for trading.
What makes the first hour of trading so important is that it creates a sense of momentum that will persist throughout the day. Sometimes people might feel confident in their stocks because the market has been growing. A large number of people might sell off their stocks, thus causing a dramatic downturn for the day. Maybe people might be in a run to buy stocks because the market declined dramatically. For instance, there was a day in early February 2018 where the Dow Jones Industrial Average dropped by more than a thousand points. Investors helped to make up half of that total back the next day.
In the Dow Jones example, people might have felt that the stocks were cheaper and therefore easier for them to get into the market. There is also the belief that people might just want to boost the market to keep any other existing positions they have from falling in value.
The first hour of trading was a point that many people watched for during that second day in this February 2018 trend. As it turned out, people were trading strongly at the start with the market going up in value. This made the market sentiment for the day a little stronger, thus leading people into making more purchases.
The best trades during the first hour don’t rely on feelings or sentiments. Rather, they are about looking a little closer into each stock to see what might be worthwhile to buy. Sometimes the trades during the first hour happen following extensive research that people perform when the market is not open. Those traders will take a careful look at how a business is developing and how certain trends or patterns might be developing. They focus less on an entire index and more on individual stocks, although sometimes those indexes might influence people to watch for those stocks in the first place. Those people will complete more trades at the start because they know everything about the stock and know right away that they want to invest in it. When the prices move up and down, there will be a real bias among investors as to what they expect during the day. A stock that trades really well and starts to move up will probably trend upward throughout the trading day. Of course, there is always a chance that the stock will decline because so many people have bought the stock and sold for some nice profits. This is the next point to look at.
