Have you been wondering what is power hour in the stock market? Just as retail stores have hours of operation, so too, does the U.S. stock market. It opens for trading during specific hours, Monday through Friday.
Certain times of the daily sessions experience high volumes of trading. Known as the “power hour” when trading activity is typically at its highest, it actually occurs twice a day.
What is the Power Hour in the Stock Market?
The U.S. stock market opens at 9:30 a.m. and closes at 4:00 p.m. Eastern Standard time (EST).
There is a “power hour” from the market open at 9:30 a.m. until about 10:30, when the volume of trading usually begins to wane, though it can still be strong for a while beyond that time.
In the earlier days of the New York Stock Exchange, as well as the Chicago Board Options Exchange (the CBOE), floor traders often took time to go to lunch and evaluate the activities of the morning.
The “lunch hour” would therefore see less trading. Even though most exchange members now use electronic trading systems, mid-day trading is still generally lighter than at the market open and near its closing.
Then during the 3:00 p.m. to 4:00 p.m. time, a second “power hour” takes place, as buying and selling transactions pick up in volume.
What Causes These Power Hours?
The world goes on, of course, during the time when the U.S. stock market is closed. Corporations can release earnings reports and announce new product launches anytime.
Power Hour #1
Often, earnings announcements are given either after the market closes or pre-market in the early morning.
In addition, events can occur on the world stage that can affect the U.S. stock market, such as geopolitical news (think of Russia’s invasion of the Ukraine or earthquakes and tsunamis).
Such news can cause huge volatility and a trading frenzy at the market open. Thus, this early “power hour” incurs heavy trading.
Stock markets in other countries, of course, may be open during times when the U.S. market is closed. Activities and events that take place in these markets can affect the opening hour of the U.S. stock market.
Australia, New Zealand and Asian markets open at 18:00 and close at 03:00 Eastern time, while Europe trades from 03:00 to 09:30.
A big drop or rise in these markets, while we were asleep, can affect what the U.S. market will do at the open.
Power Hour #2
Things begin to settle down by about 10:30 a.m.
By then, traders have bought and sold stocks to adjust their portfolios, and day traders have taken positions for the day, often exiting by noon or as soon as the trend they are watching comes to an end.
Then, lunchtime in New York brings lighter trading.
Power hour number two picks up as the last hour of trading approaches, from 3:00 p.m. to 4:00 p.m. as traders rush to adjust positions prior to the closing bell.
Volume may start getting heavy prior to three o’clock, if any news breaks that can have an affect on the market.
For example, the Federal Reserve usually releases monetary policy decisions around 2:30.
Friday afternoons can see especially heavy trading, because there is no trading on the weekend.
Monthly option expirations occur on the third Friday of every month, which can also add volatility to the mix.
Individual stocks, and the market in general, may experience strong changes as the closing bell quickly approaches, sometimes even reversing trends formed during the morning opening hour.
What Are The Stock Market’s Normal Trading Hours?
As mentioned earlier, the New York Stock Exchange opens at 9:30 a.m. and closes at 4:00 p.m., EST, Monday through Friday except for holidays.
Half-day early closings, such as on Christmas Eve, are at 1:00 p.m. EST.
Some brokerages, however, offer “extended hour trading,” with pre-market times running from as early as 4:00 a.m. to 9:30 a.m., depending on the brokerage.
After hours can run from 4:00 to 8:00 p.m.
Even the popular Robinhood platform allows pre-trading beginning at 7:00 a.m., as well as offering extended after hours trading until 8:00 p.m. in the evening.
Be aware, though, that the number of people trading during these times is minimal, so liquidity is extremely low. This makes it very difficult to get orders filled or filled at a fair price when buying and selling.
Also, “retail brokers” (individual traders) may not be allowed to trade all types of orders during this time. If you intend to trade after hours, be sure you know what you are doing!
The morning power hour of trading may give a clue as to how the market will move during the day.
Stock movements will be affected by pre-market news, which can cause big gaps (large moves) in stock prices.
Day traders, swing traders, and option traders are interested in how the market sets up for the day during the morning power hour, but this period is less important to long-term “buy and hold” investors.