The Stock Market Works by Day, but It Loves the Night (Published 2018) (2024)

FAQs

The Stock Market Works by Day, but It Loves the Night (Published 2018)? ›

Or as the New York Times wrote in a 2018 article titled “The Stock Market Works by Day, but It Loves the Night”: “To paraphrase Ray Charles, the nighttime has been the right time to be invested in the stock market.”

Overnight trading in the futures markets can provide potential opportunities to take advantage of news events that happen while the U.S. equity markets are closed, but it can also bring risk of lower liquidity with lower trading volume and wider bid-ask spreads.

The New York Stock Exchange began offering after-hours trading to institutional investors in June 1991, allowing them to trade until 5:15 p.m. With the advent of ECNs, after-hours trading became more accessible to retail traders. Most investors can now access after-hours trading through their regular online broker.

Thomas Phelps studied past companies in existence from 1932 to 1971 that grew at least 100 times in size to see what they had in common. He shares the key characteristics found in compounding machines as well as the key traits investors need to invest for the long run.

Some stocks may simply not trade after hours. In an overnight trading session, low liquidity or volume spikes may occur in either direction.

Day traders use numerous intraday strategies. These strategies include: Scalping: This strategy focuses on making many small profits on ephemeral price changes that occur throughout the day. Arbitrage is a type of scalping that seeks to profit from correcting perceived mispricings in the market.

Key Takeaways

Overnight trading is a flexible strategy that enables investors to respond to worldwide events and market shifts after regular hours. Different markets, including FX, U.S. stocks, etc., exhibit unique characteristics during extended trading hours.

As stock markets operate in different global time zones, the down time for a market depends on which market a trader is using. Night trading was made legal by the Securities and Exchange Commission (SEC) in 1999 with extended hours for trading stocks.

After-hours trading, as the name suggests, takes place after the markets close. For U.S. stock markets, after-hours trading starts at 4 p.m. and can run as late as 8 p.m. ET.

Night trading often sees more stable price movements than day sessions. Traders seeking smoother trends and reduced risk often find night trading attractive. Night traders analyse and react to the information accumulated during the day sessions.

What is the 1 rule in stock market? ›

Example of the 1% Risk Rule in Action. Take 1% of whatever your account equity is. This is how much you can lose on a single trade. As your account equity changes, so will the amount you can risk.

What is a Good Price to Book Value Ratio? Value investors often prefer values lower than 1.0, which suggests that an undervalued stock may have been found. The benchmark for certain value investors, however, may frequently be equities with a less strict P/B value of less than 3.0.

A share denotes your ownership interest or how much of the corporation you own. For example, if you own 100 shares of a corporation that has issued 1,000 shares, your ownership in the corporation is 10 percent. Similarly, if you hold all the 1,000 shares, you own 100 percent of the corporation.

The opening period (9:30 a.m. to 10:30 a.m. Eastern Time) is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time. A lot of professional day traders stop trading around 11:30 a.m. because that is when volatility and volume tend to taper off.

Newswires are a direct source of financial news and press releases. Most trading platforms have news feeds connected to some of the most popular newswires.

Price volatility: Since overnight trading often sees lower trading volumes compared to regular hours, price volatility increases. This is because prices may fluctuate more substantially due to the limited number of participants. Limited stocks: Not all stocks are available for overnight trading.

While overnight trading offers added flexibility and potential profit opportunities; there are also risks involved, including: Heightened volatility and lack of liquidity: Lower transaction volumes mean fewer people bidding/asking than during normal business hours.

The overnight gap trading strategy capitalizes on gaps that occur due to after-market events. Traders analyze news and earnings reports released after the market close, predicting their impact on stock prices.

Major forex pairs, such as EUR/USD (Euro/US dollar), USD/JPY (US dollar/Japanese yen), and GBP/USD (British pound/US dollar), remain attractive options for night trading due to their liquidity and stable price movements. As these are the most traded pairs in forex, many market participants favour them.