What Are the Best Times to Invest in Stocks?

Whether you’re a newcomer to stock market investing or a professional, the all-time discussed topic is the best time to invest in stocks. While many investors and traders claim that there is not such a thing, specific fundamental tips can help you reduce your risks and increase your chances of profit. In the following article, we will find the answer to the question “What are the Best Times to Invest in Stocks?”

Best Time of the Day to Invest in Stocks

If you are a beginner stock investor, you may be confused about when is the right time to buy a stock. Although we recommend investing for the long term instead of day trading, knowing the right time to enter the stock market in one day can help you buy the right stock at a good price.

The time in a day to buy stocks is critical, and we need to consider the trader’s experience. The first two hours of the day is an excellent time to day trade the stock market. This is when the market opens at 9:30 a.m. EST and closes at 11:30 a.m. EST in the United States. The last hour of the day might also be a good time to day trade. This will be from 3 p.m. to 4 p.m. EST in the United States. The first and last hours of the day are usually the moment where the volatility is the highest, so they can be the best for more experienced traders. As volatility and volume tend to fall down about 11:30 a.m., many professional day traders stop trading.

Because of the high volatility during the initial few trading hours, inexperienced traders should avoid stock trading as soon as markets begin. If you are a new investor or trader who prefers to avoid moments when market volatility is the highest, you should wait until 11:30 a.m. Following that, markets typically settle down, prices become much more stable, trade volumes fall, and returns become much easier to predict.

In addition, many traders trade from 3 p.m. until 4 p.m. EST. Since the morning session, traders will have a long break, giving them time to reorganize and refocus.

Best Days and Months to Invest in the Stocks

We need to look at trading in a bigger picture too. When we think about a week, the best days for trading are Mondays. There is a term “The Monday Effect” or “The Weekend Effect.” The Monday Effect theory explains that the returns of stocks and market movements on Monday are similar to those from the previous Friday.

Similarly, prices tend to fall in September, rising again a month later. In general, October is favorable, and prices frequently increase again in January, especially for value and small-cap companies.

Best Times of Year to Invest in Stocks

The sell-in-May-and-leave-it-at-that strategy is well-known among traders. If you’re wondering what’s so unique about selling in May, it’s worth noting that markets have historically produced higher returns as the year nears its halfway point.

Markets, on the other hand, tend to fall as September approaches. That is why, following the summer months, people who sold earlier in the year frequently go long. October also marks the beginning of an upward trend that often lasts until December, when some investors opt to sell their equities short for tax reasons.

However, an upward rise occurs typically in January, with the start of the New Year, and the cycle repeats. As investors gain expertise, they tend to concentrate their efforts to identify seasonal market trends in the observed data. This increasing tendency can sometimes be seen throughout the warmer months as well.

To read more about Islamic Finance related topics, please click here and visit our academy.

Besides, feel free to sign up for our free stock screening services at musaffa.com.