End of day trading strategies


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What is end of day trading?

End-of-day trading is simply about making decisions very near – or even after – the market closes. Typically, end-of-day trades take place in the last or two hours of the trading day and are specific to the stock market.

While most day traders will look to close their positions at market close, some traders will choose to enter new positions to earn end-of-day profits, whether it is a few minutes before the markets close to take advantage of the end of the day. movements during the day, or to hold at night.

End of day trading is also known as power hour, as this is usually the time when there is a lot of trading, and the high volume can create a lot of opportunities. Power hour for the stock markets is often considered to be between 7:00 p.m. and 8:00 p.m. (UTC).

Why trade at market close?

End of day trading is widely used by non-professional traders, who have day jobs or other time constraints. The concept is simple: more time spent in the markets does not equate to more profits. By focusing all of your energy on a shorter period of time, you wouldn’t have to spend all day looking at the markets.

Another advantage is that you will have all day of trading data to use in making decisions and evaluating.

End of day trading strategies

For some, end-of-day trading involves opening positions about an hour before the market closes to take advantage of other market participants closing their positions or adjusting them in anticipation of impending downtime.

Regardless of whether the market is going to close, the trading strategy is much the same. You should be looking for the same signals and patterns as you would any other trade. Before entering a position (whether at market close or not), you should have created a defined methodology for when you will trade. This should involve what entry level you want to see and when you will be leaving a trade.

Another end-of-day strategy is to buy a market at the close and resell it when the market reopens to take advantage of the moves that occur during the market close. In stocks in particular – but often in other markets as well – overnight returns can be significant. In fact, a study on overnight trading found that overnight returns tend to be higher than their intraday counterparts.1

Overnight

Intraday

Full day

Average daily returns

0.0024%

0.046%

0.067%

Daily standard deviation

1.45%

2.60%

2.85%

Value-weighted annualized returns

6.84%

3.72%

10.81%

Opening positions when markets are closed or closed allows traders to present their plans and create orders for the next day, when there is usually less activity in the market.

How to negotiate market close

  1. Open a real account
  2. Create a trading plan
  3. Identify an opportunity
  4. Place an order to profit from a trend
  5. Close your position or attach a stop loss to automate your exit

1 Overnight Trading: Lower Risk But Higher Returns ?, 2015

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