Understanding the Power Hour in Stocks

The power hour in stocks is typically referred to as the last hour of the trading day between 3 and 4 PM EST.


It’s well know that the regular trading hours for the Nasdaq Stock Market and the New York Stock Market (NYSE) are 9:30 am ET to 4 pm ET on weekdays (except when the stock market is closed for a holiday).

On early-closure days, in most cases right before and right or right after a stock market holiday, the regular trading session comes to an end at 1 pm ET.

However, trading can also be done outside of regular stock market hours.

For instance, on days with a regular session, one can buy or sell stocks during the pre-market trading session. The pre-market session typically takes place between 4:30 a.m. ET to 9:30 a.m. ET.

Traders can also buy or sell stocks in the after-hours trading session, which starts at 4 pm ET and ends at 8 pm ET.

Before the internet, only high-net worth traders and institutional investors were able to buy or sell during pre-market and after-hours trading sessions. However, small traders are now able to participate in these sessions, thanks to technological advancements.

When trading in extended sessions, traders usually place an order on the exchange as one does during the regular session and the order goes through an electronic communication network (ECN).

During the pre-market and after-hours sessions, traders can only place limit orders to sell or buy stocks. An ECN automatically matches the orders based on those set limits and only executes orders that match.

While stocks can be traded during the pre-market, regular, and after-hours session, experienced traders know that some hours of the day tend to be active than others. Such hours are called power hour.

In this blog, we are going to discuss power hour, how to analyze power stocks, and how you can take advantage of this trading period.

What is the stock market power hour?

Power hour is a common term among traders and investors that refers to a short period of time in the stock market when large, frequent trades are executed. These trades can significantly weigh on the value of indices and stocks during and after the power hour period.

Power hour period usually happens between 9:30 am ET to 10:30 am ET and 3 pm ET to 4 pm ET. They are the first and final hours of the regular trading session.

Friday and Monday are typically considered as having the most volatile power hours throughout the week. This is due to the fact that the stock does not open on weekends.

Friday typically has the most volatile power hour because many traders often get out of positions (such as expiring options contracts) on Friday before the market close.

This causes a mad rush that creates huge volume. So, that huge volume creates high volatility, and opportunity to make decent returns.

How power hour works

When there is news tied to a particular company, there is a high possibility that will be a huge power hour because traders see the news and begin pouring into the stock.

Another factor that causes power hour is the fact that there are many traders who get trades in right after the opening bell. They make these trades so they can either enjoy the rest of the day or get other work done.

The power hour that occurs from 3 pm ET to 4 pm ET has to do with traders making a lot of trades before the end of the regular session.

The huge volume creates excess volatility in the stock price, thus creates some amazing opportunities to make profit.

Trading power hour stocks

For long-term traders, power hour stocks are not as important as day traders and other individuals looking to take advantage of the volatility and short-term price movements.

Power hour stocks mean trading shares at a particular time when the stock market is doing well. Instead of spending the entire day keeping an eye on the market or making decisions that are based on historical performance, power hour stocks can free up your time and you will still be successful.

Traders can make profits from power hour whether the stocks rise or fall. There obviously has to be some buzz around a power hour stock before you decide to trade it.

If the activity around the stock is positive, then that is good because you can trade it as normal.

But sometimes there can be a negative buzz, suggesting the price of the stock will likely go down. In this case, you could trade a different stock or you could do what is called short selling (also known as “shorting” or “going short”).

Short selling is simply making a bet that the value of a stock will fall, and nobody else wants that stock.

When you want to short a stock, you first borrow a certain amount of shares of that stock from your online stock broker. Then, sell them and then wait for the price immediately to drop as much as possible. Once the price is nice and low, repurchase them and return them to your broker.

However, short selling carries more risks than normal stock trades. Traders need to know that price of the stock could rise instead of falling. This could result in unlimited losses for the trader as there is not a set limit to how high a stock can rise.

Bottom Line

Power hour stocks are good for traders looking to make some quick returns. However, you need to know what you are doing.

This period of high volume and volatility is usually caused by recent earnings reports or other news related to the stock.

If the news is good, it only makes sense that the power hour will be bullish. And if the news is disappointing, expect a bearish power.

Market activity is usually intense during power hours and this leads to a higher chance of risks.

For day traders and individuals using other short-term strategies, it is definitely worth taking advantage of the power hour opportunities. Timing trades either right before or immediately after a power hour can help you both maximize your profits and minimize your losses.

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