Investing > Complete Guide to Power Hour Stocks

Complete Guide to Power Hour Stocks

In the world of stock trading, power hour can be a fantastic window of opportunity - but first, you have to learn how to seize it.

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Updated July 08, 2022

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Do you know when to buy and sell stocks?

I mean, it sounds simple enough – you trade when conditions are favorable, right? It stands to reason that everyone wants to maximize their odds of success. Knowing when the conditions are right is sort of a sixth sense – it requires experience and knowing how to leverage various analytical methods. 🧐

But there is an element of timing involved. In fact, there are times during each trading day when the conditions are generally just right – there’s a lot of activity, a lot of volatility, and a whole lot of opportunities. This is what’s known as a power hour.

Power hours occur twice during each day – and present the best possible time to both buy and sell stocks on average. Although this is beneficial in any case, it’s a matter of great importance to traders – those among us who have chosen to adopt short-term strategies when it comes to the stock market. Although trading is more volatile during these times, this active approach can be a good way to secure positive returns.

Unlike many topics in the financial space, this is one that is quite simple and straightforward. It doesn’t require a lot of prior knowledge, and it’s quite easy to grasp. This guide is meant to be your one-stop shop when it comes to power hour in the world of stock trading – we’ll cover what it is, why it happens, and how to best use it to your advantage.

Let’s dive in! 👇

What you’ll learn
  • What is Power Hour?
  • Power Hour in the Stock Market
  • Power Hour Stock - Growing Industries
  • Important Variables During Power Hour
  • Strategies Used in Power Hour
  • How Power Hour Trading Suits You
  • Conclusion
  • Get Started with a Stock Broker

What is Power Hour 📚

Power hour is a bit of a misnomer – when it comes to the stock market, a power hour is a period of time when trading activity is at its highest. When both retail and institutional investors are active, liquidity is high, spreads are low, and there’s plenty of volatility – meaning that there are plenty of opportunities to make money.

There are two main power hours in a trading day – and they last roughly between 60 and 90 minutes. So, why should we care about these specific timeframes? It’s simple – they are windows of opportunity and offer the most favorable trading conditions. After all, if you can make securing profits easier on yourself, why wouldn’t you do it?

We’ll go into more detail in the next section, and we’re also going to explain how to best leverage these periods of high trading activity. Before we go on, we should mention that a lot of seasoned investors look at the entire days of Monday and Friday like two big power hours – seeing as how they exhibit a lot of the same trading conditions that power hours do.

Power Hour in the Stock Market Explained 📙

Power hour refers to two key times during the trading day when the stock market experiences the best conditions for short-term trading. High liquidity and trading volume, as well as increased volatility, are always welcome – so, when do these conditions occur?

First of all, there are actually two power hours – the morning hour and the afternoon hour, and they occur around the first and last hours of the trading day, respectfully.

Morning Power Hour 🌄

The morning power hour begins just as soon as the trading day does. When 9:30 AM EST rolls around the corner, the markets open up, investors flood and in, and an immediate flurry of activity occurs.

That first spike usually lasts until 10:30 AM EST, although it can last up to 30 more minutes. The effect of various news outlets working overnight immediately takes hold, and investors and traders alike scramble to find the best opportunities and adjust their portfolios.

Afternoon Power Hour 🌇

The afternoon power hour usually occurs from 3.00 pm to 4.00 pm Because the trading day is coming to a close, and liquidity will dry up, investors seek to enter new positions, exit old ones, enter swing trades, secure profits, and optimize their investments. The afternoon power hour is a veritable storm of activity.

Timing your trades to coincide with the afternoon power hours offers you a chance to both buy and sell securities while experiencing more favorable bid/ask spreads. It pays to be on alert when this happens – while you can trade after the regular trading session ends, that might not be ideal.

Is Selling Stocks After Hours a Good Idea? 🔍

Trading outside of regular market hours also comes with a set of specific conditions. After-hours trading sees an increase in volatility, but the severely reduced number of market participants means that there’s also a lot less liquidity – and this is the main thing that sets these sessions apart from regular ones.

A lack of liquidity has two immediately noticeable effects that significantly alter how trading works in the after-market hours. First, trades might not go through at all – there’s no guarantee that you’ll find a willing buyer or seller in order to execute a trade. Second, but no less important, is the fact that less liquidity leads to wide spreads – even trades do go through, it’s much less likely that it will be at the price that you originally wanted.

So, is trading in the after-market hours a good idea? Well, up until relatively recently, this was a thing that was reserved for institutional and high-net-worth investors – the average joe didn’t have access to these sessions for a long time. There’s still a bit of stigma associated with after-hours trading – but if you’re prepared for the unfavorable conditions, have a good strategy, and have a clear idea of what you want to do, you might want to give it a shot.

In particular, the biggest advantage of after-hours trading is the ability to rapidly react to new information – meaning that news traders should definitely give it a lot of consideration.

Growing Industries for Power Hour Stocks 📈

The benefits that the power hour affords you as a trader are quite valuable – but the effects are even more pronounced in the case of certain stocks. As you’ll see later in this guide, the optimal strategies for trading during power hour all benefit from a set of similar conditions – high growth potential, high volatility, and good trading volume.

By focusing your attention on a few key industries, you can both narrow the search down and get better returns. All of these industries are rapidly growing and have a lot of room to expand – becoming familiar with them could also serve you well in the long run.

Technology 👨‍💻

Tech stocks are all the rage – when you think of getting in early on the action and hitting it big by investing in a company in its early days, most of us automatically suppose that it will be a tech company – the next Microsoft, Google, or Facebook. In fact, tech stocks exemplify the idea of a growth stock – and represent more than a fifth of the entire value of the S&P 500.

A chart showing the gap between the five largest companies in the S&P 500 and the 300 smallest.
The top 5 tech companies have a +20% percent share of the S&P 500.

Although there are supply chain issues and geopolitical events to consider when it comes to investing in tech, the fact is that the tech train shows no signs of slowing down. Although there is a stumble every now and again, the industry has proven to be remarkably resilient.

Other areas, such as blockchain, also show promise – blockchain, in particular, could reach a market value of $56.7 billion by 2026 up from $6 billion in 2020. That’s a CAGR of 56.9% – which is fantastic when you consider how volatile and unexplored the industry is.

Biotechnology 🤖

Although biotechnology might sound like something from the future, trust us, it’s already here, and in a big way. In fact, the biotech market was valued at $497 billion in 2020 – and is slated to reach a value of $952 billion by 2027, at a CAGR of 9.4%.

Like in the case of the healthcare industry, biotech also saw a surge in part due to COVID-19, as we can see when looking at Moderna for example. Technological advances, investor confidence, and a wide variety of possible applications make this a promising industry – but keep in mind that there is also a large degree of risk and volatility involved.

Healthcare 👨‍⚕️

The healthcare industry has been on a lot of minds since 2019 when the Covid-19 pandemic started. Although healthcare is an industry that is renowned for weather recessions successfully, it also has a lot of room to grow.

The integration of IT and healthcare is a very promising field, and the market as a whole is slated to grow from its current worth of $4.1 trillion to a whopping $6.2 trillion in 2028. Estimated annual growth rates of 5% or in that ballpark are quite good for what is traditionally an industry used for defensive stocks. Other specific areas, such as home healthcare or wearables are also experiencing rapid growth and have good prospects, seeing as how there is a shift worldwide to an aging population.

Cannabis 🌿

The cannabis market is a relative novelty but has nonetheless demonstrated tremendous growth, and it’s only going to get bigger. In North America, both the recreational and medical markets are providing large returns.

The medical marijuana industry was worth $22.4 billion in 2020 – with some estimates forecasting that it will grow almost four times in value, to the tune of $87.4 billion, by 2027. The compound annual growth rate clocks in at 19.3%, which is very promising. As far as the recreational marijuana industry goes, it has also taken root (pun intended) wherever it has appeared – with forecasts of a 25% annual growth rate not being uncommon.

Growth projections for the cannabis market in the United States until 2030.
A forecast of the U.S. cannabis market’s growth through 2030.

However, keep in mind that marijuana stocks are volatile. However, with the advent of more U.S. states and developed economies legalizing or decriminalizing marijuana consumption, the market’s prospects as a whole are pretty good. There are bound to be a lot of winners in that mix – if you can manage to sort the weed from the chaff (pun intended), you can secure some pretty nice gains by trading those stocks during power hour.

Variables to Look Into During Power Hour 📊

We’ve established the basics surrounding power hours, as well as what industries and sectors enterprising traders should focus on – but there is a way to further narrow down the search and make the process of trading more efficient overall.

No matter which strategy is put into motion, there are a couple of variables that should always be considered. These factors aren’t guarantees of a good trade – but taking their effects into account will increase the odds of a successful trade.

P/E Ratio 🧮

The P/E or price-to-earnings ratio is one of the most important metrics of investing. No matter what you’re investing in, or what strategy you use, the P/E ratio should always be consulted. It’s a rather simple formula – to get the P/E ratio, simply divide the price of a share by the earnings per share. 

A graph showing the P/E ratio of S&P 500 from 2015 - 2022.
The S&P 500’s P/E ratio has been quite high since the beginning of 2020 – something that’s proven advantageous to short-term traders.

Another way to think about it is that P/E represents the amount of money that has to be invested in a stock in order to make $1. The higher the ratio, the less appealing a company is. In general, looking for companies with low P/E is the way to go.

But that doesn’t hold true for the power hour. Because stocks with a high P/E are more speculative in nature, they experience even more volatility during power hours. This can bring about plenty of opportunities, but it does come with additional risks.

Federal Reserve Reports 📝

The impact of the Federal Reserve cannot be overstated – from setting interest rates to choosing monetary policies, the Fed’s actions have a huge impact on the markets. This is something that a trader should always be aware of – the Federal Open Market Committee has at least eight annual meetings, all of which are followed by press releases.

These press releases signal any potential changes in the Fed’s policy, and the markets are sure to react. Keep your ear to the ground – if such as meeting is in the near future, there’s likely to be some turbulence up ahead, but that isn’t necessarily a negative, so long as you know how to make use of volatility.

Options 📜

Options are derivatives that allow investors to buy or sell a stock at a predetermined price before a certain predetermined date. Investing in options is, by nature, forward-looking – keeping an eye on the options market can give a trader a good idea as to what the market sentiment regarding a particular stock is like.

A lot of options investors trade options that have a week-long expiry date – and most of them expire on Friday. Pay extra attention during the afternoon power hour on Friday – additional activity in the options market can easily cause dramatic swings in stock price.

Quadruple Witching Hour ⏳

Quadruple witching hours are the last hours of trading on the third Friday of March, June, September, and December. What is this strange occurrence (also affectionately called Freaky Friday by some)? Well, it’s when stock market index futures, stock market index options, regular stock options, and single stock futures expire.

A chart showing a large growth of trade volume during quadruple witching hours
A representation of how quadruple witching hours cause a surge in trading volume.

We’ve already talked about how derivatives, particularly options, can affect power hour – well, witching hours are like power hours on steroids. When these days occur (mark them on your calendar), the market experiences a huge burst of trading volume and volatility.

Earnings and News 📰

A company’s earnings call can lead to a sudden and dramatic change in stock price. In much the same way, major economic news can also sway the markets. For example, an infrastructure bill can easily send construction stocks skyrocket – while a bad earnings call can just as easily send a stock’s price tumbling.

The news is, as always, unpredictable – there’s no way to look into the future, so we suggest subscribing to the top investing newsletters and consuming high-quality media that deals with finance. When it comes to earnings calls, however, you’re in luck – they’re scheduled, and you can easily mark down the ones that interest you using an economic calendar.

Strategies Used in Power Hour 👨‍🏫

Although the conditions present during power hours are also a favorable time to buy or sell securities that you intend on holding for a long time, they are much more important (and the benefits are much more pronounced) when it comes to shorter-term strategies, otherwise known as trading.

Swing Trading Strategy 🗓

Swing trading is a popular trading strategy on the whole, and it also happens to mesh quite well with the power hour. So, for those are unfamiliar, let’s clarify how swing trading works.

In short, swing trading is a middle-of-the-road approach – it involves profiting from short to medium-term price movements, with the entire process lasting anywhere from a couple of days to a few weeks. This strategy requires planning, research, and most importantly – timing.

The benefit of this approach is that it isn’t quite as hair-triggered as day trading or scalping, and it’s much easier to keep a cool head and rack up a series of profitable trades. To make the most out of the swing trading/power hour combination, we recommend making use of the afternoon power hour. By choosing the second power hour, you’ll be able to tell how the stock in question performed up to now, and whether or not the stock should be bought, sold, or held.

Day Trading Strategy ☀

Day trading refers to a strategy in which a trader buys and sells the same security in the span of a single day. In essence, day trading differs from swing trading in that the former seeks to profit from the intraday change in a security’s price.

Day trading and plain old buy-and-hold investing are wildly different. Whereas traditional investing relies on slow capital appreciation over years, relies on fundamental analysis, and is a rather hands-off approach, day trading works by securing a lot of small, consistent gains, relies on technical analysis, and requires a lot of concentration, focus, and commitment.

The increase in volatility that is seen during power hours is a godsend to day traders – volatility equals price movements, and price movements equal opportunities for day trading. It is a risky approach, and it oftentimes requires nerves of steel, but if you’re ready to commit a lot of time to study and finding a good strategy, are able to keep a cool head, and know when to call it a day – day trading might be something you should look into.

Keep in mind, however, that U.S.-based brokerages (which means most of the top brokerages in the world) have to comply with SEC regulations regarding pattern-day trading. To cut a long story short, it isn’t really possible to place a lot of trades unless the account in question account is worth more than $25,000 – although there are a couple of workarounds and exceptions to that rule.

Scalping Strategy ⚡

Scalping is the most rapid-fire approach to trading – and it focuses on quantity more than quality. Scalping is even faster and more frequent than day trading, seeing as how scalpers commonly execute hundreds of trades a day.

Scalp trades can last anywhere from a couple of seconds to a couple of minutes and rely solely on technical analysis. If you’re interested in scalping (and a lot of traders with small accounts are), try to find a brokerage that supports level 2 quotations, has direct market access and has fast execution speeds.

To successfully execute a scalping strategy, two things are needed – first, a good working knowledge of stock chart patterns, and second, a laser-focused view of what’s going on in the form of a one-minute chart or a tick. Traders will also want to be on the lookout for a spike in trading volume – a good chart pattern and increased trading volume give a pretty good signal as to what a stock’s price is going to do.

Is Power Hour Trading a Good Fit for You? 🤔

We’re nearing the end of this guide – and by now, we’ve covered all of the benefits that a power hour can present to traders (and there’s quite a few of them). That’s all well and good, but we always strive to cover a subject completely – and that means going over the drawbacks as well.

So, are there are drawbacks when it comes to the power hour? Well, not exactly – but it isn’t quite as simple as a yes or no question. It’s true that power hours bring about increased trading volume, as well as higher volatility, meaning that opportunities abound – unfortunately, that fact can matter quite little to certain investors.

The advantages of the power hour play into speculative trading. If you’re not experienced in making short-term trades, aren’t ready to experience losses, and don’t have the necessary time or know how to perform technical analysis, you shouldn’t concern yourself with these strategies and the power hour. Simply put, these strategies aren’t a good fit for beginners.

However, if you’re already somewhat experienced, ready to weather some losses, and have enough of a grasp of trading psychology to keep a cool head, you should consider giving these strategies consideration.

Ready for more strategies? Learn how gap trading works.

Conclusion 🏁

Thanks for sticking by us until the end. The elements that go into a successful trade are numerous and varied – and timing is just one of them, albeit quite important for short-term strategies. Timing alone won’t be enough – but finding the right time to execute trades is an important piece of the puzzle.

We hope that you’ve found this guide to be helpful. If you pay attention to the relevant metrics, practice, and implement a tried and tested strategy, trading during power hours can be a fantastic way to secure speculative gains.

Power Hour When Trading Stocks: FAQs

  • Can I Buy Stock After-Hours?

    Yes - quite a few brokerages allow the feature of after-hours trading to clients.

  • Do Stocks Do Better After Hours?

    No - as a general rule, after-hours trading experiences both higher volatility and lower trading volume, making it riskier than trading during regular hours. However, trading after hours does allow you to react to news more rapidly, and that can lead to better performance.

  • Do Stocks Go Up or Down in Power Hour?

    During power hour, stocks experience high volatility and trading volume - they can go either up or down, but they will do so more noticeably than in other periods of the day.

  • What Are Some Good Hours to Buy Stocks?

    As a rule of thumb, the first and last hour and a half of the trading day present the biggest opportunities - both for buying and selling.

  • Why Do Stocks Go Up After Hours?

    Stocks don’t necessarily go up after hours - they do experience increased volatility, but that can lead to both an increase and a decrease in price.

  • How Do You Know if a Stock Will Go Up the Next Day?

    The best way to get an idea of whether or not a stock will go up is to pay attention to how it performs in the after-hours trading sessions.

  • How Do You Trade After Hours?

    Trading after hours works almost exactly like regular trading - with the caveat that certain order types will likely be unavailable to you. Keep in mind, however, that you have to use a brokerage that supports after-hours trading as a feature.

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Active traders

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Huge discounts for high-volume trading

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Promotion

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All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.

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