That initial fall can be alarming, especially if you're long the stock- meaning you bought it with the expectation that its price would rise-but don't overreact. This is typically followed by a recovery period for the next 20 minutes or so, as the overnight gap is “filled” as transactions go through and bargain-hunters step in (unless the news pushing the stock lower is truly disastrous). In these cases, the stock tends to continue falling for the first five to 10 minutes as traders join the selling. But when news breaks outside of trading hours, an imbalance between buy and sell orders may cause a stock to open dramatically higher or lower than its price at the previous close.Ī stock hit by negative news often “gaps lower,” or opens much lower than it closed. Buyers and sellers can balance each other out, creating a kind of equilibrium. The surge in volume at the start of the day doesn't necessarily mean prices become more volatile. What"s more, the spikes in volume at these times happen for fundamentally different reasons, so strategies that help you successfully navigate the market's open may work against you at its close. But if you're not careful, trades can quickly move against you, which is why most long-term investors should consider trading near the middle of the day, when conditions are generally calmer.Įven seasoned traders can find buying and selling near the opening and closing bells a bit like surfing when waves are biggest-if you misread the conditions, you can easily get hurt. Higher volume is generally good for active traders: More shares are available to trade, and that extra liquidity leads to tighter bid-ask spreads (that is, the difference between the highest price someone is willing to pay for a share, and the lowest price someone is willing to accept to sell it). Volume tends to pick back up at the end of the day, as institutional investors look to close out positions or enter new ones. On a typical day, more shares trade hands in the first hour than during any other, as orders placed when the market was closed are processed. If the first and last hours of the trading day seem like the most hectic, it's because they are. Environmental, Social and Governance (ESG) Investing.Bond Funds, Bond ETFs, and Preferred Securities.ADRs, Foreign Ordinaries & Canadian Stocks.Environmental, Social and Governance (ESG) ETFs.Environmental, Social and Governance (ESG) Mutual Funds.Benefits and Considerations of Mutual Funds.
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