Hey, this is Sasha Evdakov and thanks for joining me here at Tradersfly.com, where I share with you insight about trading, investing and the stock market. In this week’s episode, what I’d like to do is share with you the Trading Time Frames or the Trading Time Zones.
That way you can see when the market is open. Also, you'll see some other things that go on and happen throughout the day within the markets.
What I’ve done over here is write down the few notes throughout the trading day and trading session. Now, these notes are not something to pay attention to explicitly in the sense of “Hey, well because Sasha said this is going to happen at 10:00 to 10:30”, then that’s what’s going to happen.
All about Time Frames
These are guidelines in terms of general human behavior, human psychology and how the market works and operates. Typically the trading day, it starts right here from 9:30 and it goes all the way to the four o’ clock sessions.
That’s our trading time frame in terms of regular market hours. Now we do have some pre-market hours right here which are from 6:00 to 9:30. You can do some trading, and you can do some trading before the market even opens.
The problem with pre-market trading is that it is early trading; the liquidity is less. Fewer people are trading so sometimes the fills that you get are not great. You need to make sure you use limit orders.
There is even before this, a very early trading market somewhere around 4:00 am and so forth but then again liquidity is very tight. If you’re just getting started, stay in that I would say 9:30 to 4:00 range. I’ll even zoom in and tell you even more so where you should stay when you’re executing your trades just for safety sake and for risk sake.
At the end of the market, we have this 4:00 to 8:00 which is aftermarket hours. You can also do aftermarket trading just like you can in the previous market. The liquidity is tight. The market is close, and people are starting to pack up, they’re going home.
Whatever it is aftermarket, pre-market, those things I usually stay away from at the beginning. Later as you get better with things, then you can potentially put on some trades. But for most people, I would stick away, stay away from those regions or areas.
As far as the market goes, the market opens right here at 9:30 am, and that’s 9:30 Easter Time. It begins at 9:30 and it gets things going from 9:30 to 10:00 is this open that happens. Now I typically tell people to stay away at least if they’re new that first half hour stays away from the market.
That is because you can have this reversal that happens from 10:00 to 10:30. This is just something I’ve noticed over the years. It’s pretty classic if you do some research about market time frames and time zones.
Usually, you’ll have an open sometimes it is a pop. Then you’ll see the reversal and if you’ve gotten into trade early especially right when the market opens and then you see things not going your way. It’s because you’re catching them in the open and you have that reversal kick in.
Now some people say “Hey, yeah he’s wrong, you know some people say go ahead and trade the open that’s when you get the best rates because then you can get all these additional time.
Potentially that’s true if you know what you’re doing. If you know and understand what you’re doing, you’re already a professional then. Go ahead and trade the open and if you have a plan in mind then trade that open. But for most people the issue I see the problem with trading that first half hour is you get these reversals.
Those reversals tend to fake out a lot of beginners, a lot of new traders and they can start continuing. For example, the stock open at high and they start moving to the upside. Then you start getting a reversal, and they dip back down entirely in the other direction, and it continued moving lower for the rest of the day.
Then you’ll sit there or look at the street and say “What happened?” And you start wondering what’s going on and that’s because of that reversal.
Once this reversal happens or this 10:00 to 10:30 if the reversal’s going to happen, it’s going to happen during this time. Now the reversal doesn’t always occur all the time. I’m saying that if it comes, it usually comes in this span and it doesn’t mean it’s from 10:00 to 10:30.
It could be from 9:40 to 10:52, so understand that sometimes in the morning you’ll get that surge of people covering their positions and then they continue back in the other direction. Now from 10:30 approximately, again these are approximate times.
From 10:30 to 11:00, you might get a pause, and this is where people are trying to find which direction the market is going to go the rest of the day or where the momentum is going to build. This is where decision making starts taking place, because of the bonds, because of the European market.
This is where this pause may start coming in to place, and people are trying to figure out where that market is going to head.
After that decision-making process happens, now we get into the move, and that’s where the movement starts to happen. Somewhere around 10 to 11:30 the move is going to happen.
Now if the market all around has, it’s going to move sideways all day, then it’s going to stay sideways through the move as well through this period of 11:00 to 11:30.
I find that after this move happens, if it does move either to the upside or to the downside, then the rest of the day, typically continues to move in that direction. Now if you have extreme volatility it may move up, and then it may move back down, and you might end up exactly where you started.
That’s not because the move is going to happen, you’re going to continue to end up in the upside or the downside. It’s just that things typically move in this range and that is because the big traders, the operators, they’re putting on their positions right before they head into this “Lunch” period.
They’re doing a lot of work. They’re putting on their positions before they head out for lunch, which typically happens between 11:30 and 2 o’ clock. Some people eat lunch a little later because they want to see what happens with the market.
Other people want to go early because they want to be back in time before the market continues to power higher where this action starts to take place around 2:00 to 3:00. That lunchtime typically is a slow period.
It’s a prolonged period in trading. However, I find that if you’re patient if you’re disciplined you can see some get catches on breakouts during this lunchtime period.
For example, if the stock for multiple months has been heading like this and hitting support range and it starts breaking, let’s say you are waiting for 2 to 3 months. It starts breaking right there at that support range at that lunch period. It’s usually a very tale tell sign.
It’s usually a good confirmation that it does so during lunch period because the energy built up enough throughout all these other months, all those other days and it happens during lunchtime where there’s slow trading or light trading.
Then you know that stock is moving to the downside.
The same thing to the upside, if the stock has been moving like this for a while and you see it breaking out during that lunchtime or lunch period then again that’s a good sign to me, and I like getting into those kinds of trades.
After this lunchtime period and after this slow period is over then you start getting to these final actions. And the final action usually will take that move earlier a little bit into that direction. If that earlier move was a little bit higher, now we move sideways a bit.
Then what it may do is continue to pop it higher.
Where the movement occurs
If it was lower, then it moves sideways. It may continue to move it lower. This little action period, think of it this way, this is the initial move, this is the A to B part for those of you who studied the technical analysis course that I have.
This lunch part is the B to C part, this is the digestion or distribution, and this action is the C to D part. That’s our ABCD pattern right there.
This action that starts to kick in between 2:00 to 3:00 is where things start to pick up, and they can last all the way. These two can be together; they can continue through about 3:30.
Again you might get a final move. You might get a little extra pop right here in this last move between 3:00 and 3:30 or this action combine and work together between 2:00 and 3:30.
Now towards the end over here what happens is between 3:30 and 4:00, is you get a portfolio check or portfolio calibration, this is one thing you want to pay close attention to, and you’re always watching how stocks end.
So if I’m looking at the stock market and how it ends, even if the day was moving sideways right here, if the market powers higher at the end of the day that to me tells me it’s strong.
On the other hand, if the market’s moving sideways or whatever direction it was, and at the end of the day there’s a lot of selling that tells to me the market is weak, and this helps tell me this 3:30. Or could be from 3:00 to 4:00, that last period of trading tells me typically what’s going to happen the next day.
This along with a lot of other things as well that I look under but this 3:30 to 4:00 tells you is there strength like this, or is there weakness coming into the market because what people are doing is the portfolio checks, now the day traders are getting out.
Are they going to hold on to their positions? Or are they not? Also the same thing, the coverings people who are in for the day or a few days are they covering because they don’t want the risk in their portfolio?
That’s what they’re doing, is they’re doubling checking things and they do a fire drill, or they say “What happens if the market skyrockets tomorrow.” Or what happens if the market declines or drops tomorrow.
Then what do I do with my portfolio? So they do the portfolio check and the portfolio adjustments during that period. Then after we close, of course, we get those after hour movements here from 4:00 to 8:00.
That’s the breakdown of the trading time zones. I will trade between anywhere 9:30 and 4:00 and sometimes pre-market. And sometimes after hours but in general I like trading right around this 10:00 to 10:30 or anywhere between 10:00 to about 3:30, is where I love trading.
I don’t like trading that last half hour and I don’t like trading for the first half hour. That’s a personal choice, you can go ahead, and if your trading style matches up for it, you can go ahead and trade the first half hour. Or you could trade for the last half hour.
There’s nothing wrong with that, and I find that because I like to trade a little bit more calmly, a little bit more patiently. I don’t want to jump in too fast and too quick because these reversals can happen. If this action starts acting weak and this final move starts acting weak.
In the portfolio checks, people start getting panicky. Especially if you have a wild market those things can reverse. What happens during the day and that’s why I don’t like trading that last half hour because then I might get whipsawed in, whipsawed out. That's because I’m focused on my plan and my goal.
For me if I’m trading a stock that I got it right here at 10:30 in the morning and then by 2 o’ clock in the afternoon I’m out half of my position. Then you know by 3:00 I’m just double checking 3:00 to 3:30. I’m just double checking that everything is still in order, everything is still moving the way that it should.
Even if it comes back slightly then maybe okay. If it goes back too fast, then I might be out of my full position. But I’m not going to put on brand new trades right away because then what can happen is if it does a pullback then it’ll come back up. And it’ll start playing mind games for me.
That’s one thing that I found and discovered over the years, you want to trade that first half hour and you want to get in early. Just understand that a lot of times there’s reversals that kick in and happen because there are those people that put on these after-hours trade.
Then some people put the pre-market trades that are now what happens here is they’re either getting in and getting out, and that’s what kicks in for that reversal.
Thanks for joining me and watching this week’s lesson about the trading time frames. Keep in mind that these trading time frames are just a guideline. If the market is acting static and it’s moving sideways, then it may just move sideways for the day.
If the market’s just constantly pounding lower then, of course, it may just continue moving lower without some digestion period in that mid-day afternoon sessions.
The same thing is to the upside. If it’s just continuing to power higher in a bull market and continuously have buyer stepping in, then you may not get that digestion period.
These trading time frames that I discussed are just things to watch out for because sometimes you have reversals. Some things that will change that trading atmosphere from going one way and then things change up.
Especially if you’re new if you’re just getting started those are the areas that can play on your psyche. They can play on your mental focus within your trading account. That way you’re not over trading, you’re not getting in and out of positions a little too quickly.
That way you’re not doing the wrong things just continually hopping in and out because that becomes very costly. Not only in transactions cost but you’re probably having a lot of losing positions as well. Keep those time frames in mind and check as you’re trading throughout the day.
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