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Should I buy or sell stocks during the opening and closing auctions only?

Personal Finance & Money Asked on April 26, 2021

From what I see, there are a number of advantages of buying or selling stocks during the opening and closing auctions:

  • Huge liquidity. The opening and closing auctions have the largest amount of liquidity of the entire trading day.

  • No need to worry about my execution speed. All orders during the auction get resolved at the same time and at the same price. I don’t have to worry about "missing the price" as a result of my slow internet connection.

  • No need to worry too much about execution quality. Trading during the auctions completely avoids questions about payment for order flow.

  • Psychologically, I avoid thinking too much about the time I place my order. I avoid thinking of (possibly irrational) things like: "I should have placed the order at 11am instead of 2pm". I can more easily ascribe the execution price to "fate" rather than "poor timing". The opening and closing auctions are fixed times with the aforementioned advantages, so I can confidently place my order and immediately get on with my day.

Given these advantages, I have decided to completely avoid buying and selling during the continuous trading hours, and instead trade exclusively during the opening and closing auctions using market-on-open (MOO), limit-on-open (LOO), market-on-close (MOC), and limit-on-close (LOC) orders.

Is there anything wrong with the reasoning I have provided above? What are the disadvantages I should be aware of? Is it a good idea to buy or sell stocks during the opening and closing auctions only?

One Answer

Most days, the opening 1/2 hour to hour tends to be more active because of the volume of news stories overnight. Volatility is a trader's best friend. But that doesn't mean that it's the best time of the day to trade and the remaining hours should be ignored. You should buy and sell when your price is available not based on some predetermined list of perceived advantages.

Answered by Bob Baerker on April 26, 2021

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