Are you currently drafting your trading plan or simply curious when it is the best time of the day to trade stocks or Forex? You are here in the right place! We have conducted a research to understand what the Best time to trade Forex or stocks is.
Xtrade - Every successful trader knows that in Forex trading, timing can make or break a trade. In this article, we’ll discuss why most successful traders trade at the beginning of the day.
The Best time to trade Forex or Stocks
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For most retail traders (I am not going to involve institutions here), evenings are spent researching trades they will place in the morning. That’s one of the reasons why the first hour of the trading day sees high trading volume—trades that were set up the evening before are filled during that hour. These retail trades, together with trades executed by hedge funds, mutual funds, and other high-volume traders, make up the bulk of trading volume during that critical morning hour. But, I am not here to tell you the best time to trade Forex or stocks is early mornings only.
What about the Afternoon Hours?
Day traders—and most retail traders are day traders—try to end their trading day without any open positions. The reasons for this are many, and as you progress as a retail trader you’ll learn more about day trading rules and strategies. For now, suffice it to say that the main reason traders close their positions by the end of the day is to enhance control. You can react quickly to the markets when you’re sitting in front of a computer—not so at night or on holidays.
How to Profit from the First Hours of Trading
Volatility Research
If you plan to trade a stock or other asset, be sure to check how it normally performs during opening hours. This information is readily available on the Internet. If the stock—we’re using stocks as an example; this rule applies to other assets, too—tends to be volatile in the early or late hours of the trading day, you might be able to buy or sell it at a significantly higher price (higher, that is, than its fundamental value). In order to position yourself to snag a great bargain during the early minutes or first hour of trading, set very high, or very low, limit orders.
How to Use Limit Orders
The best way to remain disciplined during the hectic first and last hours of trading is to use limit orders. Limit orders protect you from potential market loss by allowing you to set the maximum prices at which you will buy or sell an asset. So, if you don’t want to sell your stock at less than $12 per share, set up a sell order with your broker with a limit price of $12. Use the same strategy if you want to buy the stock at a certain price.
Buy Today, Sell Tomorrow
Answer to the best time to trade Forex or stocks often involves overnight positioning.
If you’re willing to hold a position overnight, buy your asset at the end of the day and sell it at the start of the next. By using this method, you’ll still be holding the stock for less than 24 hours. Keep in mind, however, that short-term trades come with considerable risk. Be cautious and use risk management tools.
Trading the Gap
Imagine that you just purchased a stock at $20, expecting it to rise to $25 after today’s quarterly earnings announcement. If you are correct, the stock will open at $25 tomorrow. The $5 gap in the trading chart is your profit.
The Takeaway
Trading during the hours discussed in this article is a time-consuming strategy. In fact, you’ll find that with practice you’ll be able to spend no more than two hours a day on trading. Do keep in mind, of course, that the early hours of a trading day are often volatile. If you’re new to trading, or if your risk appetite is low, adjust your strategy accordingly and proceed cautiously.
About Xtrade
Xtrade is an award-winning provider of desktop and mobile trading services, featuring CFD trading on stocks, national stock indices, commodities, and currencies. The brokerage’s financial technology includes five digital trading platforms, all of which are available in over 40 languages to traders from Europe, Asia, and the Pacific. Other prominent services include an award-winning trading education center, breaking financial news in real time, and pioneering trading tools. Xtrade’s Global Ambassador is Cristiano Ronaldo of Real Madrid. The brokerage is regulated by the EU’s Cyprus Securities and Exchange Commissions, the EU’s Markets in Financial Instruments Directive, and the Australian Securities and Investment Commission.