5 Reasons Why You Shouldn’t Day Trade After 11am


How many times has this happened to you: You trade your butt off in the morning, and by 11am you end up in the red. Maybe it was because you broke your trading rules or maybe it wasn’t and it was just one of those days. You woke up this morning to make some money, not to go to lunch in the red. You start going on the hunt for some trades to get you in the green.

Almost any setup looks attractive you, and you end up putting on three new positions. 2 of them fail, and one works. You think to yourself, okay “one of them worked, so I just need to hit that setup again.” You try that setup again, and it fails. Just like that your normal sized red day, got twice as bad, and you are even more pissed off than before.

Putting on new positions after 11am for day trades is usually a terrible idea. Here are 5 reasons why you shouldn’t open any new positions after 11am, especially if you are in the red:

1. Chop

After 11am, sometimes as early as 10:30am EST, stocks become very choppy. You rarely have clean follow through on the most explosive, high probability trading setups. Most stocks during this time are range-bound, and breakouts and breakdowns will very rarely play out. It is fine to manage open positions during this period, but putting on new positions is almost always a bad idea. The most explosive day trading setups occur at the market open, from 9:30am-11am, and also during the close, from 2PM-4PM.  

2. Low Liquidity

One of the reasons stocks become choppy during this period is that their volume dies down significantly during this period. Low liquidity periods rarely have breakouts that work, because there is not much volume that comes in at the breakout spot.

On the contrary, market makers and algos will usually put big short orders right above intraday breakout spots during the middle of the day. They trap suckers who are buying the breakout and leave them holding the bag. The spreads usually widen this period as well, which means you are likely to get more slippage entering and exiting your positions, and will have trouble trading larger size.

3. Give Back Profits

As discussed in the intro, more often than not the middle of the day is just a time where you will give back your profits from the morning, or just make a red day even worse. It is not the time to make a green day more green, or to turn a red day into a green one. If you are red on the day, the middle of the day is the best time to call it quits and move on to something else. The next morning is the time to make back the money you lost. You will have a clearer head and fresh opportunities in front of you.

4. Energy Drain

Mid-day trading is extra exhausting. There are setups you can use to trade in the middle of the day, but they usually take longer to play out. For example, at the market open a stock can take as little as 10 minutes to make a 5% move. In the middle of the day, the stock will probably take 1 or 2 hours to make the same sized move.

Let’s not forget that these moves have a much lower probability of occuring as well. When you end up trading the middle of the day you end completely exhausted by the late afternoon. If you have another job or other business to work on, you will often regret trading in the middle of the day.

5. Chain You To A Computer

At the end of the day we are all trading for freedom. When you open new positions in the middle of the day you chain yourself to the computer during the most boring part of the trading day. Why would you chose a 8 hour work day that may even pay worse than a 3 hour work day (including pre market research)? If you do like trading the afternoons, use the middle of the day to get away from your screens, and just come back a 1PM or 2PM.

There is no need to stay in front of the screens longer than you have to, especially when there is a low probability of you actually making money from the time that you put in. Remember that trading is a game where you do not get paid from showing up. You do not guarantee yourself making more money by trading more.   

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