What is the Right Time to Invest in Stocks?

Whether you are a newcomer to stock market trading or an experienced hand, the eternal question in trading is always - what is the best time to buy (or sell) stocks? While many argue that there is no such thing, there are some basic rules of thumb that can minimize your risks and offer you a higher chance of profit. Especially if you have just gotten your share trading account, but are still learning the ropes, it makes sense to learn about and adhere to these 4 simple recommendations on the right time to invest in stocks.

The Best Time of Day

This question is most applicable to intraday traders who buy and sell all their stock on the same day. Intraday traders do not retain any stock with them and as such, they need to make their profits within the trading hours on a single day.

Logically, it may seem like handcuffing yourself to your trading account right through trading hours and watching intently for an opportunity to buy or sell might be the best route to choose. However, this is not true for the following reasons

  • Too many hours watching charts and graphs causes mental fatigue and confusion.
  • The volatility drops after the first 90 minutes.
  • The volume in which stocks are traded might also drop after the first 90 minutes.
  • You will cross swords with seasoned traders whose moves you may be no match for. Experienced traders are looking to manipulate rates and turn graphs around - this is no time for a newbie to experiment.

All these factors taken into consideration, the best time of day to trade is 9:30 to 10:30 am. The stock market opens for trading at 9:15 AM. However, in the first 15 minutes, the market is still responding to the previous day's news and again experienced traders are sharking around the waters. As a result, that first 15-minute slot is best avoided. If you would like to have more time to make your observations in order to make a more informed decision, stretch your trading time to a maximum of 11 am.

The Most Lucrative Day

Many forums will tell you that Monday is the best day to buy stocks, while Friday is the best day to sell stocks. The logic behind this advice is that stock prices are said to be at the lowest on a Monday (meaning you will buy shares at a lower price). The same contention goes on to say that stock prices are at their highest on a Friday (meaning that you will sell at a higher price). However, if everyone played that game then there would be no sellers on a Monday- everyone would only want to buy. Similarly, there would be no buyers on a Friday because all traders would only want to sell. This would mess with demand-supply economics. There is no such thing as a standard best day of the week.

The Most Favourable Conditions

The best time to buy stocks is when share prices of a given stock are at a low. Of course, there is a chance that they will drop even further, but buying at a low price is significantly safer than buying at a high price where the price of the stock is unlikely to climb much higher. Instead, prices may drop and you will end up having to sell at a loss. When you buy shares at a low price, they may drop further but there is a significantly higher chance that they will soon turn around and rise, giving you the chance to sell at a profit.

The best time to invest in F&O or to buy F&O contracts is when Open Interest, i.e. OI is low because it means that people are keen to sell and this usually means lower buy rates.

Other factors

Keep tabs on the share prices of your chosen stock to know when is a good time to buy. An indicator called Moving Averages will tell you the range of your stock price, which is the highest it ever rises and the lowest it ever falls. This will help you make a more sound decision. Additionally, watch for news related to your stock. Good news and dividend payouts often result in a stock price rising, for example.

Conclusion

It is safe to say that you must research and keep a keen eye on charts, indicators and news around your preferred stocks. However, keep things balanced. Avoid spending every single minute of every single day with your online trading account open on your screen. Watching the stock market like a hawk and trying to cash in on every single opportunity will end up being counter-productive. Be diligent in ensuring you are on the ball with regards to the four simple recommendations discussed in this article but do not overdo it.

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