Timing is almost everything.
Most people wanting to trade in stocks also want to find out when is the best time of the day to buy and sell stocks. With stock prices constantly going up and down, your timing can turn into a jumbo profit or shocking loss.
There are no complex rules on the best time of the day or week to buy stocks. It mostly depends on your trading strategy and goals. However, there are guidelines and market patterns that can give you a clue to the best time of the day to buy and sell stocks.
Trading as soon as the market opens (9.30 a.m Eastern) and within the first two hours seems the best time to buy. The first hour tends to be the most volatile, providing the most opportunity (and potentially the most risk). Although it sounds harsh, professional traders often say that a lot of “dumb money” is flowing at that time.
So-called dumb money is the phenomenon of people making trades based on what they heard in the news the night before. The information and analysis these people are acting upon is typically old news.
Their trades can create sharp price movements in one direction. Professional traders can then come in and take advantage of the unjustifiably high or low price and push it back the other way.
Another reasoning behind this timing is if a stock is set to rally due to good news released. If the market were closed, the best prices for the stock would generally be right after the opening bell. However, if the expected rally fails to occur, the trader can quickly count his losses and trade out.
Business and geopolitical news also significantly impact markets and individual stocks at different times, so it pays to watch out for news breaks and economic reports that create higher volatility.
Best day of the week to buy stock.
According to a market theory called the “Monday or weekend effect,” Monday would probably be the best day of the week to buy stocks. The Monday effect says that the market will continue gaining on Monday if the market was up on Friday. The Monday effect has largely disappeared over the last decade. However, the day is still quite an exciting trading day in the stock market.
Best day of the week to sell stock.
We have already talked about the best time and best day of the week to buy stocks. For the best day of the week to sell a stock, Friday would typically be the best, especially if the Friday under consideration is on a long 3-day weekend.
Best day of the month to buy and sell stock.
Due to monthly adjustments to stock portfolios by mutual and hedge funds during the beginning of the month, the best time of the month to buy stock would be around the middle of the month, around the 10th or 15th.
Stock prices tend to decline during the middle of the month, which could create a buying opportunity. Specific dates for stocks could also present buying opportunities. For example, a company’s earnings report, news of a stock split, or a potential takeover bid by another company could present trading opportunities and are not specific to days of the week or month. Doing some research always helps.
The best day of the month to sell stock would probably be one of the days in the last week of the month, leading to the month’s last trading day. The week leading up to the end of the month is often used by portfolio managers to “dress up” their portfolios by buying more of the stocks in their portfolios that have performed well. This strategy tends to drive the prices of those well-performing stocks even higher near the month-end. So that is an excellent time to sell.
Bottom line and the very best time
These buy and sell times are guidelines. They are not scientific signals. Investors and New day traders should trade stocks based on fundamentals. You can control the time to buy and sell stocks. What you cannot control is the direction the price of your stocks would go.
In conclusion, the absolute best time to buy or sell stocks is whenever the perfect opportunity comes.