This is an example of general US market intraday movement. Obviously these are not rules, this does not represent every day, and you should not base your entire trading strategy around this. This is only meant to be a vague guideline for what you can typically expect from the market on a given day.
This. Is. Not. Every. Day.
(Also see When Are The Best Times To Trade?)
9:30am ET – The US stock market opens. There is usually strong movement and high volatility. This is one of the “dark zone” time periods where it is not recommended to be in a trade for at least the 5 minutes before, until at least 5 minutes after the opening bell. You will typically see heavy volume in one direction or another.
For options trading, this first half hour can be great for potential hourly OTM/ATM binary options, or spreads. Not so great for ITM hourly trade.
10:10am–11am – Many stocks reverse their trends. When stocks open with strong buying (or selling), specialists and market makers were forced to take the other side of the longs (or shorts) and sell short (or long). They have no intention of riding losing positions forever, so they start ‘dropping the bid’ so they can cover their short (or longs) at a profit.
You can often see a V reversal (where a downtrend quickly reverses back up) or a caret reversal (where an uptrend quickly reverses down). This is best seen on the 5 minute and 15 minute chart. As you are learning market movement and watch for this, note when the reversal appears around significant levels such as deviations and ICE (value area) levels.
11am–1pm – ‘Lunchtime Doldrums’. This is when most of the traders in New York go to lunch, usually resulting in lower volatility and volume. Sometimes you will see range bound trading—which is often taken advantage of by options traders with strategies like the iron butterfly—or a reversal continuation.
1:30pm–1:45pm – Most often the market compresses during lunch and volume picks up after, and the market then starts to make its next move.
2:15pm – Volume should be relatively strong and the trend should continue or reversal.
3:30–4pm – Going into the close you will generally see heavy volume and big money getting their positions in or out. Prices will move fast and while some take advantage of quick movement with options plays, caution is prudent.
4pm–4:20pm – There is often still some movement to be seen right after market close. This is especially true when there are significant earnings announcements. Depending on the company and the market you’re watching, this can create volatility much like market open and high impact news events. If you trade near or after market close, it is highly recommended to always be aware of any earnings announcements scheduled.
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Futures and Forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
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Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points, which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program, which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect trading results.
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