In swing trading, your entry is everything. Your entry is the difference between a winning trade and a losing trade. Knowing what time of day is the best time to enter a swing long position will greatly improve your wins and trading profits.
Certain hours during the day provide the best opportunity for entering a swing long trade near the low of the day so entering a trade only during these hours can help prevent the “darn, the stock dropped right after I bought it” situation. Buying randomly at just any time during the day is generally not a good practice.
Best Time of Day To Buy Stocks
Let’s review what usually happens in the stock market every day on an hour to hour basis.
9:30 AM EST (6:30 AM PST) – 10:30 AM (7:30 AM PST) = More volume and volatility, market either goes up or down
10:30 AM (7:30 AM PST) – 11:00 AM (8:00 AM PST) = Less volume, volatility drops, often goes opposite direction as first hour
11:00 AM (8:00 AM PST) – 1:30 AM (10:30 AM PST) = Lunch hour plus time buffer, low volume consolidation and chop out sideways market action
1:30 AM (9:30 AM PST) – 2:00 PM (11:00 AM PST) = Breakout attempt of consolidation zone set during lunch hour
2:00 PM (11:00 AM PST) – 3:00 PM (12:00 PM PST) = Traders move up stops closer in anticipation of the last hour of trading where things get volatile
3:00 PM (12:00 PM PST) – 4:00 PM (1:00 PM PST) = Last “Power Hour” of trading. More volume and volatility, market either goes up or down.
For swing traders, the best time of day to buy stocks is when the market does a pullback which means it’s generally not a good idea to buy stocks within the first hour of trading when everything is moving higher. The best time to buy stocks is between 10:00 AM (7:00 AM PST) and 11:00 AM (8:00 AM PST).
If I’m stalking a long position and in Power Hour it does a big move down, especially before a weekend, I may take a long position right at the end of day close with the idea that I may sell it the following day into an upward move during the first hour of trading.
Best Time of Day To Sell Stocks
If I’m in a stock and it’s up big at market open, I made decide to sell the stock in the first hour of trading. The idea is that I want to sell into the buying in that first hour of trading, before the 10:30 AM pullback.
Testing Relative Strength
If I’m in a stock and during the 10:30 AM (7:30 AM PST) to 11:00 AM (8:00 AM PST) hour, SPX pulls back but my stock only does a minor pullback or none at all, I may stay in the position longer citing good relative strength (which is often the result of a PR).
Stock Trading Based On News
External news catalyst events can change the intra-day trends listed above. It’s a good idea to remember that these hourly trading cycles are just tendencies and not hard and fast rules or trading signals. Also, the first hour of trading may last a little longer than an hour, or the following counter trend hour may come a little earlier or a little later than 10:30 AM (7:30 AM PST). You have to be flexible with these hourly cycles. Remember, it’s not the hourly cycles that drive markets, it’s trader psychology.