The US stock market has certain patterns, based on the time of day. These patterns, or tendencies, happen often enough for professional day traders to base their trading around them. One tendency is that the stock market can become less volatile, flatten out, and see less volume in and around the New York Lunch Hour. Many day traders stop trading about half an hour to an hour before this slowdown kicks in and don't trade again until well after the lunch hour, when volatility and volume pick up again.
9:30 (EST/EDT) : The stock market opens, and there is an initial push in one direction.
9:45 : The initial push often sees a significant reversal or pullback. This is often just a short-term shift, and then the original trending direction re-asserts itself.
Six Intraday Templates and Trading Setups for the S&P, Nasdaq and Dow Jones.
True Open, 6 Hour Cycle, 90 Minute Cycle, and 22.5 Minute Cycle.
11:15 – 11:30 : The market is heading into the lunch hour, and London is getting ready to close. This is when volatility will typically die out for a couple hours, but often the daily high or low will be tested around this time. European traders usually close out positions or accumulate a position before they finish for the day. Whether the highs or lows are tested or not, the market tends to "drift" for the next hour or more.
11:45 – 13:30 : This is lunch time in New York, plus a bit of a time buffer. Usually, this is the quietest time of the day, and often, day traders like to avoid it.
13:30 – 14:00 : If the lunch hour was calm, then expect a breakout of the range established during lunch hour. Often, the market will try to move in the direction it was trading in before the lunch hour doldrums set in.
14:00 – 14:45 : The close is getting closer, and many traders are trading with the trend, thinking it will continue into the close. That may happen, but expect some sharp reversals around this time, because on the flip side, many traders are quicker to take profits or move their trailing stops closer to the current price.
15:00 and 15:30 : These are big "shakeout" points, in that they will force many traders out of their positions. If a reversal of the prior trend occurs around this time, then the price is likely to move very strongly in the opposite direction. Even if the prior trend does sustain itself through these periods, expect some quick and sizable counter-trend moves.
As a day trader, it is best to be nimble and not get tied to one position or one direction. It can be very hard to hold a trade for very long between 3 p.m. and the close. The last hour of trading is the second most volatile hour of the trading day. Many day traders only trade the first hour and last hour of the trading day.
15:58 – 16:00 : The market closes at 16:00. After that, liquidity dries up in nearly all stocks and ETFs, except for the very active ones. It's common to close all positions a minute or more before the closing bell, unless you have orders placed to close your position on a closing auction or "cross."
Big News Events can throw a wrench in these tendencies, resulting in big trends, reversals, or movement through the lunch hour or other times that would be uncommon without some sort of external catalyst.
Darya Filipenka (October 31, 2023) - ICT AM NY Session A+ Setup based on Quarterly Theory.
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Darya Filipenka (January 18, 2024) - Quarterly Theory - London and New York AM & PM Setups.