Beyond the Bell: Finding Your Best Time to Trade the ASX

Most volume at Market Open and Market Close.

Market Open (around 10:00 AM AEST): This is a period of high volatility and volume as traders and investors react to overnight news, international market movements, and release of company announcements.

Market Close (4:00 PM to 4:10 PM AEST): The end of the trading day, specifically the “Closing Single Price Auction,” also sees a significant spike in volume. This is due to professional traders closing out positions and managed funds rebalancing their portfolios.

While the open and close of the market are the periods of highest volume on the ASX, there are still profitable times to trade during the day. The “best” time depends on your specific trading strategy and goals, but here’s a general breakdown:

The “Lunch Hour Lull” (around 12:00 PM to 2:00 PM AEST)

This period is typically characterized by lower volume and volatility. For some traders, this is a great time to avoid the noise and find opportunities for specific strategies.

• For Beginners: This can be a good time to practice and get comfortable with trading. With less volatility, price movements are more predictable and the risk of significant, fast-moving losses is lower.
• For Certain Strategies: Traders who use mean reversion strategies often find opportunities during this time. The theory is that after the morning’s volatility, prices tend to “revert to the mean” or settle into a more stable range.
• For Scalpers: Some scalpers might still find opportunities to make small, frequent profits from minor price fluctuations.

The Mid-Afternoon (around 2:00 PM to 4:00 PM AEST)

As the day progresses, volume and volatility tend to pick up again in the lead-up to the close. This period can offer a renewed set of opportunities.

• For Trend Traders: If a clear trend has been established during the morning, this can be a good time to look for a continuation of that trend before the market close.
• For Breakout Traders: As volume increases, some stocks may break through key support or resistance levels, providing opportunities for a trade.

Important Considerations for Trading Outside of Open and Close:

• Liquidity: The “lunch hour lull” has lower liquidity. This means that for some stocks, especially smaller ones, it may be harder to enter or exit a trade at your desired price. Bid-ask spreads can also widen, meaning the difference between the buying and selling price is larger, which can eat into your profits.
• International Markets: Keep an eye on the opening of other major markets, particularly Asian ones, as their open can influence certain Australian stocks and sectors.
• Company News: Look out for any company announcements or news releases that happen during the middle of the day. These can trigger sudden spikes in volume and volatility.

Ultimately, the best time to trade is when your chosen strategy aligns with the market’s behaviour. Always have a clear plan, manage your risk, and be prepared to adapt to changing market conditions.