End-of-day trading: what is the best end-of-day strategy?

What is end-of-day trading?

End-of-day trading is simply the practice of making decisions very close to – or even after – markets close. Generally, end-of-day trading occurs in the last hour or two of the trading day and is specific to the stock market.

While most day traders will be looking to close out their positions at market close, some traders will choose to enter into new positions to make end-of-day profits – whether just for a few minutes before the markets close to take advantage of end-of-day movements, or to hold overnight.

End of day trading is also known as power hour, because this tends to be when a lot of trading happens, and the high volume can create a lot of opportunities. Power hour for stock markets is often considered to be between 7pm to 8pm (UTC).

Why trade at market close?

End-of-day trading is widely used by non-professional traders, who have day jobs or other time constraints. The concept of it is simple: the more time spent on the markets doesn’t equal more profits. By focusing all your energy on a smaller timeframe, you wouldn’t have to spend all day watching the markets.

Another benefit is that you’ll have the whole days’ worth of trading data to use to make decisions and evaluate.

End-of-day trading strategies

For some, end-of-day trading involves opening positions in the hour or so before the market closes to take advantage of other market participants shutting their positions or adjusting them ready for the impending downtime.

Regardless of the fact the market is going to close, the strategy for trading is much the same. You should be looking for the same signals and patterns as you would for any other trade. Before you enter any position (whether at market close or not), you should have created a set methodology for when you’ll trade. This should involve what entry level you want to see and what point you’ll exit a trade.

Another end-of-day strategy is to buy a market at close and sell it again when the market reopens to take advantage of movements that occur while the market is shut. In stocks especially – but often in other markets too – overnight returns can be significant. In fact, a study on night trading found that overnight returns tend to be higher than their intraday counterparts:¹

	Overnight	Intraday	Full day
Daily average returns	0.0024%	0.046%	0.067%
Daily standard deviation	1.45%	2.60%	2.85%
Annualised value-weighted returns	6.84%	3.72%	10.81%

Opening positions when markets are closing or closed enables traders to outline their plans and create orders for the next day, when there is typically less activity on the market.

How to trade market close

Open a live account
Create a trading plan
Identify an opportunity
Place an order to take advantage of a trend
Close your position or attach a stop loss to automate your exit

¹ Night Trading: Lower Risk But Higher Returns?, 2015

StoneX Financial Ltd (trading as "FOREX.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, FOREX.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date.

This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it. No opinion given in this material constitutes a recommendation by FOREX.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although FOREX.com is not specifically prevented from dealing before providing this material, FOREX.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Financial Ltd. StoneX Financial Ltd is a company incorporated in England and Wales with UK Companies House number 05616586 and with its registered office at 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is authorised and regulated by the Financial Conduct Authority in the UK, with FCA Register Number: 446717.

FOREX.com is a trademark of StoneX Financial Ltd. This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy. FOREX.com products and services are not intended for Belgium residents.