Pros and cons of End of day trading

When it comes to trading, you might have commonly come across day trading. Day trading is nothing but trading when the markets are functional and operating. It is nothing but trading during the regular business hours.

However, there is another type of trading style known as end of day trading. As the name suggests, end of trading is all about trading after the markets close or trading closer to the day’s business hours.

There are of course certain benefits and also disadvantages when it comes to end of day trading. This is just a trading style. Remember that the strategies you will use with day trading or swing trading will be the same if you are trading end of day.

The only difference here is that unlike most, you will be focusing your trading execution and analysis closer to the market close or even after the markets close. As you can see, this type of trading requires a slightly different approach in the analysis, but the overall trading style remains no different to day trading.

In this article, we look at the pros and cons of end of day trading and you will be able to decide for yourself if this is how you want to trade. After all, there are no strict guidelines on when and when you should not trade. It is mostly a matter of choice and preference than anything else.

What times does day trading end?

Before we get into the details, let’s briefly shed light on what time does day trading end. Day trading, as you already know is about trading when the markets are open. Now this depends on which markets you are trading.

For example, if you are trading futures or stocks, then these markets are open during the regular business hours, in the jurisdiction where they are listed.

The regular business hours are from 9 – 5 or sometimes at 6.

This is when day trading ends.

But if you are trading the forex markets for example, you know that these markets are open 24 hours a day. Thus, there is actually no end to day trading when it comes to the forex markets.

But again, this is a matter of perception. For example, the European trading session opens at 8AM Frankfurt time and closes by 5PM local time. This is nothing but the day trading time for forex in Europe.

On the other hand, the London markets open an hour later. This slightly shifts the London day trading time to reflect their regular business hours.

In general, day trading is when you will see more market participants. This leads to higher liquidity in the markets as well. This is when many day traders prefer to trade. Towards the closing sessions, liquidity drops as day traders unwind their positions and close trading for the day.

So, in order to figure out what time day trading ends, simply look to your local markets and when they open to get an idea of what time the markets open and when day trading ends.

Five reasons why end of trading is convenient

If you are wondering what the benefits of end of day trading are, and if it is ideal, then in this section we break it down for you. Here are five reasons why end of day trading is more convenient compared to swing trading or day trading.

1. Cut the noise

End of day trading is all about trading when the markets are closing. This gives you the option to be less distracted compared to day trading. When the markets are busy, there is a constant flow of news which impacts the prices.

Sometimes, you can easily get distracted by the news. This can go to a point that it could also impact your trading decisions. So, at times your trading plan can be ignored as you adapt to the new incoming data.

There is nothing wrong with this. However, if you let yourself get too distracted, you will end up taking wrong decisions which could eventually impact the trade itself. With TV channels, social media and various trading forums, one doesn’t have to look too far.

Lots of people air their opinions and at times you might feel that your trading plan is incorrect. This peer pressure leads you into shifting your analysis. Chances are that it may be right, but there is also an equal chance that your new analysis can turn out to be wrong as well.

In order to avoid this, end of day trading can help you focus more. As the markets close, the distraction is also lower. This allows you to focus more on your analysis. It also gives you time to build up a trading plan.

2. End of day trading is cheaper

If you are trading stocks or futures, then you know that in most cases, you will be required to pay fees for intraday data alongside other fees such as transaction costs and software fees.

Over a period of time, day trading can easily eat into your profits as the fees become more expensive, depending on your trading style. End of day trading is all about trading with the closing prices of the day.

Many online brokers do not charge a fee for such service. Because the end of day prices are widely available from everywhere, you do not have to pay additional sums in order to gain real time market data.

This can be a great way for you to cut down on costs and focus on the things that really matter, which is your analysis and drawing up a trading plan based on your analysis.

There are many charting platforms that you can use outside of your online broker to analyze the markets with end of day data. In fact, if you are hard pressed for funds, you could even use the trusty Microsoft Excel which has an inbuilt feature to import data from free sources such as Yahoo Finance or other such sites.

Even scanning tools are relatively cheaper when it comes to end of day trading and if you add up all the benefits, you will see that end of day trading will certainly be a lost cheaper compared to getting access to real time market data.

3. End of day trading allows you to keep your day job

Another major benefit with end of day trading is that you can keep your day job. Because your analysis starts when the rest of the markets are closed, means that it does not interfere with your regular job.

End of day trading is something similar to swing trading. Your positions of course will be left open overnight. But your trade adjustments such as moving your risks to break even or adjusting the profit levels are easier to manage.

When you combine other aspects such as access to a charting platform, or doing research, an end of day analysis gives you a whole summary of what went on during the day.

We should note that end of day trading doesn’t mean that you should be adjusting your positions only at the end of day or closer to the market closing hours. On the contrary, you will be using the end of day trading strategy to benefit from the time that you will get and of course the fact that the markets are lot more quiet during this period.

While many traders dream of quitting their day job to trade the markets full time, end of day trading gives you the flexibility to both actively trade the markets and also keep your full time job.

4. You will be trading with limit or stop orders

With end of day trading, there is a very high likelihood that you will be trading only with limit or stop orders. Sure, at times you might trade with market orders, but the chances for this is much less.

There are some clear benefits when you trade only with limit orders. For one, some online brokerages charge you a higher fee when you trade with market orders. This is because the execution costs are high when you day trade.

With limit orders, you are in a way adding to the liquidity of the security that you want to trade. Therefore, some brokers offer lower fees or at times free trading if you trade with limit orders.

You can see that this clearly lowers your costs of trading and puts you at a better advantage compared to regular day traders. If your analysis is right and your limit orders are triggered, you can just sit back and relax rather than constantly stay glued to your trading screens to see if you entered the market at a good level or not.

This type of trading is also referred to as a set and forget method because you are simply able to set up your trades with limit orders and forget about it for the rest of the day. Of course, the following end of day is when you will be able to revisit your trades and adjust them accordingly.

5. End of day trading makes you more disciplined

In the previous points we mentioned about cutting out the noise and the ability to trade with limit orders. These have benefits such as leaving you more time to focus on your analysis and also to cut down on the trading costs.

An additional benefit of trading with end of day is that it makes you more disciplined. With end of day trading, you are utilizing just a few hours a day to analyze the markets to create a trading plan.

Based on your trading plan you will then be able to place your limit orders. As you can see, in doing so, you are automatically becoming a disciplined trader. It takes a lot of time and practice to learn patience when it comes to trading.

With end of day trading, you are automatically doing this without focusing too much of it. There are benefits from this because it keeps you from overtrading and it allows you to think rationally and without emotions.

Your trading psychology is automatically improved as well. As a disciplined trader you will not have to wonder about the markets and if your positions are in profit or not. Due to the fact that you also cut out the noise, you are able to purely trade based of your view on the markets.

End of day trading also helps you to avoid all the noise which could influence your position. Because short term market news tends to impact the price of a security, it is only for the short term. Trends do not change overnight or within one intraday session to another. In this aspect, end of day trading puts you at a slightly higher advantage.

Risks of end of day trading

Having outlined the benefits of end of day trading, it is only fair to also present to you the risks that come with this style of trading.

To begin with, the biggest risk is that you are trading when the larger markets are asleep. This puts you at risk to overnight market developments. For example, you will see that around earnings releases, price tends to gap significantly.

Thus, because you are trading just once a day and that too towards the closing hours of the markets, this can leave your positions vulnerable to overnight market movements.

With day trading, due to the fact that you are able to constantly monitor the markets, you can manage your risk efficiently.

But this isn’t the case with end of day trading. You can either make huge profits or your stops can be triggered even before you had a chance to adjust your risks.

Liquidity is another thing that goes hand in hand with the above. When the markets are closed, there is lower liquidity. Thus, there is a chance that your limit orders are not triggered at the price that you wanted.

There is also a big chance that your limit orders will be triggered at a worst price leaving you to scramble and manage your risk or worst, close the trade at a loss. These are some of things that you should bear in mind when it comes to end of day trading.

Earnings season is something that you should be wary about. Because most companies tend to release their earnings before the market opens or after the market closes, you can expect to see the pre-market and after-market pricing turning volatile.

With low liquidity and high impact news releases, the risks are higher with this type of trading.

Another factor to bear in mind is that because your positions are left unnurtured during the day, any black swan event can easily cause huge losses to your positions. This means that although you use the end of day prices to trade, you will have to keep an eye on your open positions during the day in case of any adverse market movements.

End of day trading - Conclusion

End of day trading is mostly suited if you are an investor or plan to trade in the long term such as holding your positions over a few weeks or months. In this aspect, it is possible that you can avoid the market traps and the day to day volatility in the prices.

We have presented both the pros and cons of end of day trading. It is up to you as a trader to figure out if this is how you want to trade. Remember that there is no right or wrong way of trading.

You can use an existing trading system such as trend following system in order to build up your trading plan. The end of day trading is somewhat closely related to swing trading or even investing. Because you focus on the markets only once a day, you automatically start to put focus on the risk management aspect as well.

Once the trade starts to move in your favor, you can simply capitalize on it and start to build positions. Thus, the end of day trading requires a slightly different mindset compared to regular day trading where speculative moves are a different ball game.

You cannot expect to day trading using the end of day trading approach.

End of day trading is all about approaching the markets when they are closing or are closed rather than trading when the markets are open. There are risks with both day trading and end of day trading. This is something to consider before you want to switch your trading style. You might like end of day trading only to realize that this method doesn’t suit you. That is perfectly fine.

As with anything, you will be able to judge for yourself if end of day trading is something that appeals to you. Every trader is unique and so is their trading style. So, while one trader might prefer day trading, there is always someone else who prefers end of day trading.

About Me

I'm Mike Semlitsch the owner of PerfectTrendSystem.com. My trading career started in 2007. Since 2013 I have helped thousands of traders to take their trading to the next level. Many of them are now constantly profitable traders. 

The following performance was achieved by me while trading live in front of hundreds of my clients:

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