For some, end-of-day trading involves opening positions in the hour or so before the market closes to take advantage of other market participants shutting their positions or adjusting them ready for the impending downtime.
Regardless of the fact the market is going to close, the strategy for trading is much the same. You should be looking for the same signals and patterns as you would for any other trade. Before you enter any position (whether at market close or not), you should have created a set methodology for when you’ll trade. This should involve what entry level you want to see and what point you’ll exit a trade.
Another end-of-day strategy is to buy a market at close and sell it again when the market reopens to take advantage of movements that occur while the market is shut. In stocks especially – but often in other markets too – overnight returns can be significant. In fact, a study on night trading found that overnight returns tend to be higher than their intraday counterparts:1
| Overnight | Intraday | Full day | |
| Daily average returns | 0.0024% | 0.046% | 0.067% |
| Daily standard deviation | 1.45% | 2.60% | 2.85% |
| Annualised value-weighted returns | 6.84% | 3.72% | 10.81% |
Opening positions when markets are closing or closed enables traders to outline their plans and create orders for the next day, when there is typically less activity on the market.