End of day trading takes place the last hour or two of the trading day. Trading power hour stocks is a lot of fun! End of day trading is also known as “the power hour”. The best time of day to trade are at the open and near the close. Why? Because that tends to be when the most volume of trading is happening. Power hour stocks have the potential to be lucrative when traded correctly.
Table of Contents
What Is End of Day Trading and Power Hour Stocks?
End of day trading takes place between the hours of 2:30 PM EST to 4:00 PM EST. Power hour is considered between 3:00 PM EST to 4:00 PM EST. These hours are when traders come back from lunch and try to make end of day profits and enter into new positions. From 9:30 to 11:30 there is a lot of liquidity in the market. Then it slows down until power hour. Specifically, traders consider Power hour from 3pm-4pm. Sometimes around 2:30 traders start to come back to the market though because they want to get setup for the end of day moves.
When trading, less is more. Over trading is a thing you should avoid. The same goes for boredom trades. The best trading happens in 2-3 hours typically, instead of spending the entire day trying to trade.
Setups
End of day trading stocks are the stocks with the most volume and the best setups the hour before close. After the first hour and a half of trading, the stock market slows way down.
Traders take a lunch and leave the trading to computers. The volume goes way down at that time. You need to understand what volume mean in stocks to truly understand how important it is.
Specific hours provide the best trading opportunities. As traders, the goal is make a profit. In order to do so, it isn’t about patterns and support and resistance but also timing.
Have you ever tried to trade in the middle of the day? Stocks trade sideways and volume is really low. It’s like watching paint dry. As day traders that is really painful to be apart of.
There are many day trading tips you can follow but many times time of the day isn’t apart of those. If you day trade for a living, then you get a nice break in the middle of the day.
Imagine if you got to take a good break working an office job. You’d be out of there napping or running errands. You wouldn’t stay working if you didn’t have to. Trading is just like that. Take a break and don’t force trades.
Trade the open. Then trade power hour. Power hour stocks aren’t hard to find and end of day trading has good setups for whatever style of trading you excel in.
Ending the Day Without Positions
Unless you’re swing trading stocks, you’re going to close out your positions. Day trading means you’re getting in and out of trades quickly. As a result, if you took a position before trading slowed down, then you’re going to want to close it out before the end of day.
That means come 3pm, traders want to get out of positions. Another thing to consider is that anyone wishing to avoid the PDT rule will come in to buy a stock to hold over night.
Hence the buying and selling that picks up with power hour stocks. Volatility is important to trading. Without it, you don’t get price action. End of day trading can help to grow your brokerage account.
Swing Trading Power Hour
Swing trading is a technique in which you buy a stock to hold overnight up to a couple of weeks. End of day trading works especially well if you’re going to hold a stock overnight.
Another great part of swing trading is allowing traders under the PDT rule to get around it. The PDT rule limits the amount of day trades you’re allowed if your trading account is under $25,000.
Any trading accounts under $25,000 get 4 day trades in a business week. As a result, you can be limited in your trading. However, swing trading allows you to bypass that rule by holding overnight.
If you find a good setup, you can buy during the end of day trading and sell the following day. As a result, there’s a lot of potential in getting a better entry than people who get into the stock the following day.
It’s important to remember that news can affect the direction of a stock overnight. As a result, pay attention to earnings dates and check for any potential news. That is a risk with swing trading.As long as you have a good entry, and set support and resistance alerts, you are doing it the right way.
If you’re new to trading, open a Thinkorswim paper trading account with TD Ameritrade. Then you can practice swing trading power hour stocks and see how the end of day trading works for you.
Limit Orders vs Market Orders
Being disciplined in your trading is extremely important. One way to do that is by using limit orders with power hour stocks. Many traders use market orders if they think the bid/ask spread is close enough, and that the stock is going to move very quickly in a direction.
Make sure you know and understand the difference between market order and limit order. Limit orders allow you to set your buy and sell price. Hence, you control where you buy and sell.
However, make sure you’re practicing good risk management when trading. It doesn’t matter what time you’re trading, you need to have a plan and stick to it. Deviating from your trading plan rarely works out in your favor. In fact, you usually hear from traders that they took a loss when they didn’t follow their plan. End of day trading doesn’t mean your trading plan differs from how you trade the opening bell. A plan must always be in place.
How do You Trade Stocks in the Last Power Hour?
- Here’s how you trade stocks in the last power hour:
- Map out intraday support and resistance levels
- Look at price action compared to VWAP
- See if price is above or below VWAP and moving average lines
- Determine whether you’re looking to make end of day scalp on breakouts
- Look to enter new swing trade positions if setups are good
- Be aware of breaking news
- Make sure you’re aware of FED decisions
- Track the overall market using $SPY $SPX or /ES
- Be careful holding into the weekends
Volatility
Trading power hour stocks may not have the volatility that the open has. However, no matter what time of day you trade you need to play the setups.
Support and resistance trading is still just as important with end of day trading as it is in the morning. Look for patterns as well as moving average crossovers.
The stock market is a battle between buyers and sellers. They fight at the open, take a break and regroup, then come back to end the day with another battle. Watching price action on a chart will tell you a lot. Sometimes its best to sit and observe.
Those battles form patterns as well as support and resistance. As a result, it helps traders know how to trade. There’s no magic formula that tells you what a stock will do.
However, patterns can give you a sense of direction. If you want to know with certainty what a stock will do, then support and resistance might be the closest way to give that to you.
Profit Margin
When swing trading you’re potentially looking for a larger profit margin. Hence it’s imperative to be able to find support and resistance. Trading with those levels in mind can and will change the way you trade. Many times we want to jump into a stock when it’s running. For example, if a stock is trading at or near highs going into the close, I see that as a bullish signal that my swing trade is strong and that we are more likely to have a continuation the following day.
With day trading or swing trading, in general, I prefer to buy the dip sell the rip. When its towards the end of the day and power hour stocks are running, wait for a pullback to enter. At the very least, wait for consolidation and for the lower range of the consolidation to present itself.
That may mean you don’t place a trade during power hour and that’s OK Sometimes not trading is the best play and sitting out until a clear entry presents itself. Ideally, all trades should be confirmed by high volume.
My favorite power hour stocks are $ROKU $TSLA $SPY $AMD $AAPL – these stocks I use to TRADE and NOT INVEST! They have great volume and price action and typically an ATR (average true range) that allows me to profit.
