Why Morning Is the Worst Time to Trade Stocks

Rising stock-market volatility is proving especially costly for retail investors who typically buy and sell stocks soon after the market opens—often the most perilous time of the trading day.

Buying and selling by individual investors is especially heavy in the minutes immediately after the market opens in the U.S. at 9:30 a.m. Eastern time, when the chances of getting the best price for a stock are lower and swings tend to be bigger, traders and other market observers said.

But within minutes, the gap between the price sellers want for a stock, known as the “ask” price, and what buyers are offering, the “bid,” shrinks sharply and continues to narrow up until the end of the trading session. This quirk in the market has been amplified in recent weeks amid the big market swings.

The smaller gap, or spread, is better for investors because they are less likely to overpay for a stock or sell below the prevailing price in the market. The wider the spread, the more exposed investors are to high costs, which can erode returns at a time when major stock indexes are down for the year.

Source: Why Morning Is the Worst Time to Trade Stocks - WSJ

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.