“Stock price alerts” are an incredibly common feature offered by most brokerages. When you turn this alert on, you’ll get notified when your stocks’ prices move up or down by more than 5%. If you use these alerts then you’ve probably noticed that they tend to come in waves. For example, you will probably get a few alerts at once right when the market opens. However, you probably get far fewer alerts once the market has been open for a few hours.
This generally happens because there are specific periods where the stock market experiences more activity than normal. These periods are called power hours.
This article will take a look at power hours and determine if stocks are likely to go up or down during this time.
What is a power hour?
In general, a power hour is usually when you focus on one single task for an extended period of time (approximately 60 minutes). For example, a salesman might do a power hour where they focus exclusively on making cold calls for an hour. This allows them to focus solely on the task at hand and (hopefully) be more productive.
When it comes to investing, a power hour is a period of time when both individual and institutional investors executive large, frequent trades. During this period, the value of stocks and indices can be incredibly volatile.
What is the best hour to buy stocks?
There are a few common time periods that are considered “power hours” in the stock market. The two most common are the first hour that the market opens and the last hour that the market is open. Both of these periods usually experience a spike in trading activity.
- Morning power hour (9:30am – 10:30am) – This is the time when investors are catching up with any news that might have been announced during the previous night or early in the morning.
- Afternoon power hour (3:00pm – 4:00pm) – This is the most common power hour in the stock market. This is the last hour that investors are able to close their positions, finalize trades, and optimize their portfolios before the market closes. Due to this, there is usually a rush of buying and selling that occurs during this time.
Additionally, Monday and Friday are considered entire power hours by themselves for the same reasons. On Monday, investors rush to react to any news that occurred over the weekend. On Friday, investors need to finalize all trades before the market is closed for the weekend. Due to this, both of these days generally experience higher volatility as well.
By this point, we know what you’re probably thinking. Is there a way to use this volatility to your advantage? Let’s take a look at whether you should sell stocks after the final power hour has ended.
Is it smart to sell stocks after hours?
If you’re not familiar, after-hours trading is just trading the goes on after regular market hours are done. This gives you the opportunity to make trades after the frenzy of power hour trading has concluded. As a reminder, here are the hours for the stock market:
- Premarket hours – 4 am to 9:30 am EST
- Normal market hours – 9:30 am to 4 pm EST
- After-market hours – 4 pm to 8 pm EST
After-hours trading used to be reserved for institutional investors. However, in recent years these hours have opened up for individual investors as well.
If you are an individual investor then there is definitely the opportunity to make money from this increased volatility. However, there are also a few things to be wary of if you plan to trade after hours. Here are a few examples:
- Less liquidity -There are significantly fewer investors placing trades during after-hours. This means that it might be harder for your trades to go through than it normally is.
- Wide spreads – During after-hours, there is a wide spread between the bid and the ask price. This means that, even if your trade goes through, it might not be at your desired price point.
- Stock price volatility – Since there are typically fewer traders in the after-hours market, there tends to be lower trading volumes and liquidity. Both of these can lead to increased stock price volatility.
For savvy investors, it’s definitely worth taking advantage of these power hours. Timing trades either before or after these hours can help you both minimize your losses and maximize your gains.
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