Timing for stock traders is an important skill. You must know when is the best time to buy stocks for short-term or long-term or else… you lose your money.
If you are buying for the short term, you want to make profits within a day or a week. If yours is a long game, you must carefully vet the company you want to trade with
If you want to trade for short-term, ie you want to make money quickly, as a trader, you must know the best time to buy stocks on a trading day.
First things first. There are two main determinants that dictate how a stock will perform that day:
1. Overnight News
When trading closes, news that break determines how a company’s stock will perform the following day. If it is good news, most likely the stock of that company will gain big in the market and vice-versa. Serious stock traders track news of a company there are interested in before throwing their money into the market.
2. Morning News
These are headlines that mushroom just before a trading day starts. Morning headlines set the pace and activities in the stock market although their consequences are more or less similar to those of overnight news.
when is the best time to buy stocks in a day?
The answers to this question are endless. However, experts have determined that the best time to stock is shortly after the market opens.
Morning traders usually milk from mistakes committed by those who purchased or sold stocks at the wrong time of the day. Often the biggest loser is someone who gets intimidated by morning headlines.
While this news can impact the market adversely, most of the time prices stabilise after midway to the advantage of “morning gamblers”. In the US stock market, market trackers advise traders to buy or sell between 9:30 am and 10:30 am ET or as late as 11:30 am EST.
What Happens in The Stock Market During Afternoon Hours?
At this time, chaos in the market brought about by morning and overnight news has calmed. It is unlikely that the company’s news in the afternoon hours will fluctuate prices in the market. The best time to buy or sell stocks in the afternoon hours is between 11:30 am and 2 pm.
It is not advisable to buy stocks during EST because at this time the market has stabilised and the chances of making money are slim unless there is some news that leaves the market reeling and shaken.
Closing Hours Market Movements
When the market nears its trading hours, there are a lot of movements that can be positive or negative. It is an open secret that most amateur traders make mistakes during closing hours as most of them rely on market news throughout the day.
Experienced investors take advantage of the amateurs and buy or sell between 3 pm and 4 pm ET. This is because the inexperienced folks trade at the last minute and more often than not they lose their money.
Best Time of The Week to Buy Stocks
This has not much debate. Experts have repeatedly advised investors to buy or avoid stocks on Mondays. When trading for the week closes on Friday, weekend news affects the market to a very great degree.
Unlike weekday news when trading hours between one day to the other are few, thus limiting big effects, weekend news and events can have far-reaching consequences.
Biggest Mistake by Short-term Traders
While most traders sell when there are negative news or market sentiments about a company, the smart ones buy at this time in a strategy called buying the dip. This is because when almost everyone is selling the prices are favorable.
Now if your goal is to buy stocks as a long-term investment, there are some tips that you can follow:
1. What Are Your Goals?
Setting your goals before a swim in the stock market is a step you cannot ignore. Here you write down what you want to achieve in long run. Some of the questions you can ask yourself are:
1. what rate of return do I want at the of the day?
2. What is the future potential for the market or industry I want to invest in?
2. There is a Limit to Everything
When things are long-term, of course, you want to make money in the coming years. However, buying stocks is a gamble and your appetite for risk should be high. You might have done your best research, but still, lose money because a lot can happen and change the course of history. Therefore, know your limits. Don’t ruin for goals by throwing all your money in stocks.
3. Consult Professionals
In every sector, there are people who have the expertise and can be of great help when you are starting. Imagine speaking to a professional in the stock market can help you avoid costly trading mistakes. Professionals can also help you calculate your returns after a certain number of years. This is important because your gains are subject to taxation.
“Don’t put all your eggs (in this case money) in one basket” is a piece of great investment advice. After doing your homework and identifying stocks with future potential, buy shares in a number of companies so that even if one crashes, you have a cover. This also helps build your portfolio.
Experienced investors buy stocks when shares of a company are undervalued. When a company has so much potential in the future and its stocks are down there, that is the best time to purchase. Some of the ways to determine this include analysis of a company’s discounted cash flows, dividend growth over the years, sale and price cash flows, price-to-earnings compared to competitors, and price-to-sales. Also, when stocks go on sale, buy! Most traders avoid stocks when prices are low, but those who buy at this time often turn out to be the great winners after some years. As we said earlier, it is a gamble and you must be willing to take risks.
After all, is said and done, you must be patient. At times you may need to close your eyes and hold stocks even when things are not looking up and your fellow investors are selling. And finally, reading and reading again about the stock market is something that cannot be emphasized enough.