What is the perfect moment for buying stocks?
Every trader wants to know when the best time to buy and sell stocks is. Although there is no such time, there are the most favorable periods that you can use to enter the market. Read on to learn them.
The best time of the day
Maybe it’s not possible to name the best time of the day to buy stocks, but it’s possible to list the riskiest periods of the day when you should avoid equity purchases. The stock market is the most volatile in the morning because market participants will evaluate the events that occurred after the previous closing bell. Therefore, it’s hard to determine a fair stock price.
The closing bell is used on some stock exchanges to announce the end of the trading day. The NYSE is the most popular example. Since 1903, the stock exchange has used electrical bells for each of the four trading areas, but they are operated synchronously.
The period from the opening of the trading session (9:15 am in India / 9:30 am in New York) to 10:30 am experiences the biggest price movements in the shortest amount of time. Remember about the time zone. If you trade on any of the Indian stock exchanges, you should consider India Standard Time. If you want to trade on the largest American marketplaces, you should remember that both the NYSE and Nasdaq open according to Eastern Standard Time.
The middle of the day is the calmest period. After the market reacts to the news of the previous day, it waits for further news. In the middle of the day, the stock price is supposed to have a fair value, as news releases have already been priced in.
The price during the last hour of the trading session becomes highly volatile again. For the largest American stock exchanges, the closing bell rings at 4 pm EST, while the Indian stock market closes at 3:30 pm IST. You should avoid buying and selling shares during the last trading hour.
The best articles in your mailbox
Subscribe and get essential info on trading weekly
Great! Please check your email
We've sent you an email to confirm your subscription
Something went wrong
Try reloading the page. If that doesn't help, please try again later
The best day of the week
There is no best day of the week to buy and sell shares. It’s believed that on Monday, the stock market drops because of the weekend effect — events that happened over the weekend are believed to be bad and negatively affect the stock price. Also, investors’ negative mood due to their return to work on Monday is expected to pull the stock market down.
Although it seems plausible, statistics say the effect of Monday is questionable. Check the average percentage change of the S&P 500 Index:
Conversely, Monday seems to be the most favorable day to buy stocks because you won’t be confused by the many events that will happen during the week. However, it’s not the best day to sell equities, as they may decline due to the weekend events. Try to sell your shares on Friday.
It was discovered that the stock market conditions are especially good before long-term holidays because of generally positive feelings. The markets generally rise ahead of the holidays.
The best month
To see if the current month is a positive time to enter the stock market, check the diagram below.
These are the S&P 500 Index’s monthly average returns from 1950 to 2017.
The end of December is considered a good time to buy shares of small-cap and value stocks. This is because investors and traders get rid of the assets that have fallen in value to claim capital losses on tax returns. Moreover, they believe that the new year should begin with something new. Another reason is the “January effect” – investors return to the market and boost the stock prices. Small-cap and value shares rise the most.
September and October are traditionally down months (the conclusion is made based on drops that occurred during The Panic of 1907, The Great Depression of 1929, and Black Monday in 1987). The stock price is supposed to drop. You can use falls to buy shares on dips.
Investors wonder if there are so many trading strategies, are there perfect intervals of the day, week, or month to enter the stock market? The answer is no because the financial market changes rapidly. You can apply the general rules mentioned above, but remember that the best time to purchase stocks is when you analyze the market properly, like what you do, and have enough funds to buy the stocks and cover losses (if they happen).