Timing the Market vs Time in the Market: When’s the Best Time to Buy Stocks

When it comes to the stock market and trading, there are two major types of traders. There’s the day trader who looks to buy and sell stocks within the day or within a certain time period, and those are interested in holding long term in the hopes that the stock continues to rise.

The first thing that we want to establish here is that there is no wrong way to trade within the stock market. Both day trading and long-term investing have their benefits.

That being said, you can open yourself up to many mistakes if you don’t know what you are doing within the market itself. Therefore, no matter how you plan on trading, you need to make sure that you are putting yourself in the best position for success.

In today’s blog post, we are mainly going to be focusing on timing the market as opposed to time in the market. We are going to be discussing the best time to buy stocks so that you can get an idea of when you will want to be active within the market.

We do want to warn, however, that while there is evidence to support our reasoning, the stock market is still a volatile place that can change at a moment’s notice.

This is not a guide guaranteeing that you will make money nor are we trying to do that either. We are simply trying to provide you with the correct information so you can learn when the best time to buy stocks is.

There will be days when you find success and make money, but there will also probably be days when you are in the red. If you find yourself in the red, this is where you might want to consider switching to a time-in-the-market approach to earn some of that money back.

Before we hop directly into talking about when to time the market and when the best time to buy stocks, we want to discuss timing the market vs. time in the market so you can fully grasp what those terms mean, but the implications around them.

Time In the Market

Time in the market is all about long-term investing and holding onto your stocks for as long as possible. People who employ this method are generally looking to hold onto their stocks for several years and just let them accumulate in value.

It’s not nearly as sexy as day trading and timing the market, but for the most part, it is a safe play that can net you some nice returns depending on how much you have invested.

With the time-in-the-market approach, the person doesn’t care about finding the best time to buy stocks that day. Because they are thinking so far ahead in the future, missing out on one stock or saving a few dollars isn’t going to be the difference between them making or losing money.

Therefore, time-in-the-market is generally a much less stressful approach and is recommended if you are someone who doesn’t want to spend a lot of time staring at candles and interpreting graphs.

Timing the Market

Timing the market is all about buying low and selling high. This is an approach that you are going to be taking if you plan on offloading your stocks quickly (usually within an hour or two, sometimes a day). The philosophy around timing the market is that you need to find the best time to buy stocks.

If you’ve traded on a stock market before, you are probably already aware that you need the stock to go up enough so that it can earn you money, while also beating out the fees that the platform or exchange is charging you.

This is the main reason why finding the best time to buy stocks is so important. Small increases might be nice, but if you aren’t beating the fees, you aren’t making any money at all.

To summarize all of that, timing the market is a method used for day traders and it is used to make money and beat the fees on the exchange.

The one problem with this method however is that you’ll never know for certain how to time the market. You can have a general idea of when the best time to buy stocks is, but it’s never a guarantee as we’ve mentioned before.

Now that we’ve looked at these two approaches, it’s time to break down timing the market a little deeper. We want to talk about when the best time to buy stocks is so you can use that information to help you out as best as possible.

The stock market is not open 24/7 like the crypto market, therefore you only have a limited window to act during the day if you want to trade. This will play a huge role in learning when the best time to buy stocks is.

Stock Market Hours

The stock market opens up at 9:30 am EST during the week and closes at 4:00 pm EST. There is no trading on the weekend either.

Any time that is outside of that window is what is known as aftermarket hours. For example, any time on Saturday or Sunday would be considered aftermarket hours because the stock market is not open on these days.

While there are ways that you can go about trading in the after-hours market, most people sit back and wait for the stock market to open again.

Keep in mind however that many big businesses do possess the ability to conduct trading in the after-hours and stocks can still move quite a bit. Typically, day traders will look to unload their stocks before the market closes so they do not have to worry about any of this.

With all of this information in front of us, it is now time to determine when the best time to buy stocks is. If you are looking to day trade, here are some pieces of advice that we can give you.

Trading In the First Hour

Timing the Market vs Time in the Market: When’s the Best Time to Buy Stocks

Typically, the stock market is at its busiest in the first hour it opens. It is during this time that you can expect stocks to be most volatile, bouncing up and down at rather large amounts compared to how they move throughout the rest of the day. Why is this the case?

This is typically because of the amount of “dumb money” that is floating around and being traded. Dumb money is a term used to describe traders who make decisions based on what they saw on the news the night before.

As soon as the stock market opens, they look to use that information in the hopes of making some money. While it can work out for them, these trades are not based around much information.

When “dumb money” trades are made, typically the price will start to move in a certain direction. More experienced traders with a lot of money will see this and then push the stock back in the other direction.

What does this mean? If they notice that many people have sold and there is a great opportunity to buy, they will start to mass buy stocks which will then start inflating the price again. The same goes for the opposite situation. If dumb money inflates a stock, traders will then look to sell and cash in on some profits there.

Because there is a ton of volume at this time in the market, it makes it one of the best times to buy stocks. Most day traders operate in this first hour, and some push it towards 11:30 am EST, but not much longer than that. If you catch a big news story the night before, you could use that as information to predict how the market is going to be moving when it opens.

Keep in mind that while there is a chance for large profits during the first hour due to trading volume, there is also potential for large losses as well.

The stock market is volatile at this hour and sometimes moves in directions that you would never think. That being said, the morning proves to be one of the best times for trading stocks due to the amount of volume and trading that is going on.

Trading In the Last Hour

After about 11:30 am EST, the stock market starts to settle down a little with some people making trades, however not nearly to the extent that you would see in the first hour.

The trading volume typically stays calm until we approach about 3:00 pm EST. The last hour of trading has now begun and the day traders are now back, refreshed and focused.

Timing the Market vs Time in the Market: When’s the Best Time to Buy Stocks

You are typically going to see something similar to the first hour in the stock market. 

Expect to see a lot of sharp moves, followed by reversals to balance what just happened. The dumb money that we talked about in the morning is back out as plenty of traders are looking to get in last-minute out of fear of missing out. This makes it one of the best times to buy stocks as the trade volume is up quite a bit.

All of this seems to climax in the last five to ten minutes of the market, with professional traders scooping up more stocks if they think the price is low, or selling them off if they think the price is inflated.

If you’ve ever watched the stock market in the last ten minutes, you’ll have noticed the massive price fluctuations that happen in the last few minutes. If you have the right information, this can definitely be the best time to buy stocks.

Buying On Monday

There is a typical trend in the stock market where the price seems to dip on Monday after the stock market opens. While there isn’t any particular reason for doing so, most people think it is either people just wanting to unload their stocks after watching them move on the weekend, or simply the thought of going back to work puts people in a gloomy mood.

While there is still a “Monday effect” on the market, it has been greatly diminished. With that being said, Monday can still be one of the best times for buying stock.

Selling On Fridays

If Monday is the best time to buy stocks, then Friday is going to be the best for selling stocks. People look to sell on Friday because they are expecting Monday to result in a dip. The stock market is all about buying low and selling high, therefore people look to get out before the price drops.

If you want to get more advanced with trading, you can look to short a stock on Friday and cover it on Monday. If you are looking for a particular day to sell your stocks, we would have to say Friday would be your best bet.

Closing Thoughts

Even though we have given you all of this information, we still cannot sit there and guarantee the best time to buy stocks. All of this information is based on the volatility of the market and while you can make a lot of money trading in these hours, you can also lose a lot of money trading in these hours.

Make sure you are doing your research beforehand so you can get an idea of what is going to happen when the stock market opens. Has a good news report been published about a company? You can expect stocks in that area to rise when the morning hits.

The final thing we want to say is that you don’t immediately have to jump into the stock market as soon as it opens up. You can look at the trend that is taking place and then use it to predict what is going to happen next. Large movements are generally going to result in some sort of correction going the other way. If you can time this, this is going to be the best time to buy stocks.

When trading, make sure you are trading with money that you can afford to lose. We don’t want to see any of our readers lose more money than they can afford to at any point. With that being said, good luck with the market, and hopefully you have learned how to time it correctly.

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