In a Nutshell: The best time to buy a stock is typically during the morning hours when exaggerated market reactions to news create buying opportunities, and in the last trading hour, known as ‘power hour,’ where price shifts can be advantageous.
KEY TAKEAWAYS
- Understanding and exploiting the morning market behavior, specifically the ‘morning panic’ or sell-off due to algorithmic reactions to the news, presents significant buying opportunities.
- Recognizing the ‘power hour,’ the last trading hour of the day, is crucial as it often sees dramatic shifts in stock prices due to the decisions of less informed, ‘dumb money’ investors.
- Developing familiarity with specific stocks and their consistent trading patterns can guide more informed and successful trading decisions.
When is the Best Time of Day to Buy a Stock?
In the ever-shifting landscape of stock trading, where milliseconds can mean millions, timing isn’t just important—it’s everything.
Enter Cameron Bennion, the visionary behind Young Money Investments. With a rich tapestry of over ten years woven into the stock market’s highs and lows, Bennion is more than just a seasoned trader; he’s a connoisseur of market rhythms.
Deciphering the Market’s Morning Mood
Bennion advocates for a strategy he favors: capitalizing on the morning panic or sell-off.
This phenomenon typically occurs when algorithms react to overnight news releases, creating exaggerated movements at market open. Often devoid of solid fundamentals, these movements present a ripe opportunity for strategic buying.
“The best time to trade the market is going to be 9:30 to 10:30 a.m.,” says Bennion. This window often witnesses the most significant movements in the shortest time, a pattern many day traders exploit.
Understanding the Patterns and Playing Smart
Bennion emphasizes the importance of familiarity with specific stocks and their patterns.
He uses Tesla and AMD as examples, noting their consistent behaviors in the market. “One of the biggest things that you need to do as an investor is to have those ten tickers, maybe twenty, that you are very familiar with,” he advises.
The Role of the Short Seller
For short sellers, patience is key. Bennion suggests waiting beyond the opening bell to gauge the market’s direction.
He warns against the pitfalls of ‘dumb money’ – decisions based on outdated news – and highlights how professional traders exploit these missteps.
Power Hour: The Last Hour of the Trading Day
The final trading hour, known as the ‘power hour,’ is crucial. It’s a time when ‘dumb money’ investors make hasty decisions, either entering or exiting the market, often leading to significant price changes.
Understanding this pattern can be advantageous for both long-term investors and day traders.
Key Strategies for Successful Trading
Bennion outlines several strategies for successful trading:
Identify and Understand Consistent Patterns: Recognizing patterns in specific stocks can guide buying and selling decisions.
Be Cautious with Short Selling: Wait for the right moment and don’t act on impulse.
Avoid ‘Dumb Money’ Decisions: Base trades on current and relevant information, not on outdated news.
Utilize Power Hour: Be aware of the last hour’s dynamics and use them to your advantage.
Use Technical Indicators Wisely: Look for stocks trending above the EMA and showing signs of a reversal for swing trades.
Conclusion: Trading with Knowledge and Patience
In summary, the best time to buy or sell a stock depends on understanding market patterns and being patient.
The morning offers excellent opportunities, especially in recognizing exaggerated movements. “Keep a solid, sturdy, stable, focused mind,” Bennion concludes, emphasizing the importance of discipline in trading.
Incorporating Bennion’s advice into your trading strategy could mean the difference between success and failure in the stock market. Remember, knowledge and patience are your best allies.
