With the stock market still trapped in bearish territory, the question of when to buy stocks is more difficult than ever. With billions of trades executed in a single trading session, how does any investor know when to pull the trigger? There is no one right answer, but there are many strategies and tips that can help you decide when to buy stocks, when to wait and when to exit.
Here’s what you need to know.
What is the best time to buy stocks?
The best time to buy is the same for each stock – when the stock is trading at its lowest point after a bearish price goes down before a bounce causes it to go up again.
It’s easy to spot that perfect buying point—as long as you have the advantage of hindsight after it actually happens. However, detecting the drop while it’s running in real time is a bit more challenging.
There is no magic formula. If there were, everyone would be rich – but that doesn’t mean there are no pointers you can use to try to get your timing as close as possible. Keep reading to learn some tips and strategies on when to buy stocks.
Is there a best time of day to buy stocks?
The stock market is open on weekdays, excluding market holidays, from the opening bell ringing at 9:30 AM ET to the time of the closing bell ringing at 4 PM.
So when, exactly, is the right time to buy during those 32 hours and 30 minutes of weekly trading activity?
Before you attempt to answer this question, it is important to know when the biggest price swings usually occur if you are looking to take advantage of market swings.
The activity after the bell and before makes a fickle morning
Although the market closes to the general public at 4pm, both retail and institutional investors participate in after-hours trading after the closing bell, but trading after the bell takes place at a much smaller volume. News of companies crashing after the closing bell often drives a lot of after-hours trading – but these trades aren’t settled until the opening bell signals the start of the trading session the next day.
Also, investors usually react to pre-market news that breaks just before the start of trading when the next trading session starts.
Because of these two factors, trading is heavier and price movements are most dramatic in the first hour or two after the opening bell. As noted by Forbes Advisor, this makes 9:30-10:30 or 11:30 a.m. the best time to trade if you are keen to take advantage of market volatility.
Trading in the middle of the day is quieter
Although each trading session is unique, the morning rush is usually followed by a lull from about 11:30 in the morning until about 2 in the afternoon. This is when trading is less frequent and prices are more stable, according to Forbes Advisor. Of course, dramatic news can cause severe market reactions at any time of the day, but in general, midday trading hours are not the best time to buy for traders looking to take advantage of volatility.
The period before the market closes presents renewed opportunities
The last hour of the trading day tends to bring another wave of activity, as pointed out by Forbes Advisor. These are the moments when day traders close their positions and investors flock to their last chance to take advantage of the news that has broken throughout the day or get into highs late in the day.
Therefore, the last minutes of the trading day present another opportunity to take advantage of key price movements such as those that can be expected shortly after the opening bell in the morning.
There is another opportunity here, too.
According to Forbes Advisor, the pre-close wave is usually fueled by inexperienced traders who trade on news and emotion rather than strategy. This gives seasoned investors the opportunity to take advantage of the bad choices and bad timing that beginners are known to offer at this time.