^THIS!“ Don’t Trade Near the Open—or the Close, for That Matter
What does that mean? I feel like I've always placed Vanguard trades at night before bed or early in the morning. Should I only be doing this during market hours?
The stock market takes some time to “wake up” after the opening bell. Since most participants operate during normal market hours, the opening auction and shortly thereafter is a time for price discovery—a fancy term for the jousting that occurs when incorporating all the orders and investing decisions made by participants since the prior close. Market makers play it safe during this time: The more volatile the market, the wider their spreads.
As price discovery works out its kinks and bid-ask spreads coalesce around prices for stocks, market makers can more accurately price ETFs. This leads to tighter spreads and more liquidity, making it the ideal time to trade ETFs. That is, until the closing bell approaches. As the market winds down toward day’s end, many market makers widen their quotes to limit their risk headed into the close. Closing auctions are where the action is, and participants don’t want to get stuck with a bad trade right before the closing price is struck. As a result, spreads tend to widen as US markets approach the close.
In light of these considerations, it makes sense to wait about 15 minutes after the opening bell to trade an ETF and to avoid trading during the 15 minutes leading into the market’s close.“
https://www.morningstar.com/funds/5-tips-trading-etfs-6
When I trade, I always do it manually and always inside a 2 hour time period in the middle of the trading day - and with a calendar reminder.
Cheers.
Statistics: Posted by dcabler — Sat Nov 16, 2024 6:18 am — Replies 9 — Views 555