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

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.