Experienced traders know that a huge amount of the volume on a given trading day is seen in the first hour and the final hour. This isn’t too surprising, especially considering the buildup of buy and sell orders which start to pile up after the market closes and continues through the night and into the morning ahead of the opening bell. Some even refer to it as “amateur hour” while these orders get flushed out. And if the old adage is true that “professionals close the market,” then it makes equal sense that the latter portion of the day also sees a flurry of activity with institutional money making moves ahead of the closing bell.
Dr. Brett  put up an interesting post  today which reminded me of this topic, and although he is referring to e-mini S&P futures (ES), the early and late-day volume surges are common across the board in the market.
Clearly the most liquid times of the day come early and late, which means there’s ample opportunity for traders to get hurt during the mid-day mess. The smile-pattern that Brett refers to leaves a lull during the central portion of the day, which is worth commenting on. Not only does the lack of volume make it easier for a big player to push things around, but it also is frequently characterized by choppy trading and narrow ranges. That makes it extra tough to initiate new positions and find traction, so if you choose to stay active in the middle of the day, keep a couple of things in mind. Be sure that if you’re initiating trades during the mid-day lull that your timeframe is a bit longer than just a couple of hours, or that the relative volume is strong enough in the issue you’re watching that the mid-day mess won’t take away your smile!
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading, Brett Steenbarger[/tags]