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They say that stocks go down during the day and up at night
21–30 of 154 posts
Re: They say that stocks go down during the day and up at night
#22There's a few (often contradictory) explanations for this. My favourite is: Things that can be sold quickly are safer (because you can sell them if bad news comes out) so are worth less than less liquid things, like holding stocks when the market is closed. So by holding stocks overnight you are being payed for taking on the risk by those selling them before closing.
So the stock goes up overnight because of the risk that... the stock will go down overnight?
Surely if the risk was real, the stock would actually go down sometimes, and cancel out the "free lunch", and on average there would be no effect to explain!
Re: They say that stocks go down during the day and up at night
#23Earlier quoted context omitted.
Intraday means you buy some stock - in some exchange - in the morning at the open price in the opening auction and sell the stock in the evening at the close price in the closing auction. Overnight means you take the other side: buy at the close and sell at the open. (This is a bit more complex conceptually as you would never settle the trades and that may be problematic regarding dividends and other corporate action…
Could you please explain this complexity? ELI5 even? You never settle the trades? Dividends etc? Hmm maybe I am 5... Edit: ok yep so I guess what if they repeated the analysis leaving some time around open/close for chance of trades to settle, would the effect disappear or would this chance beef the key factor for the reported gain?
Settlement is when you actually own the stock you bought and the seller actually gets your money. That happens a couple of days after the trade. In the meantime it’s just “as if” but not quite and that has practical consequences. For example you can’t take your money out of the brokerage account until it’s really there.
Re: They say that stocks go down during the day and up at night
#24Earlier quoted context omitted.
Simply put, day means if you bought on the market open and sold at the close. Night means if you bought on the close and sold on the open. The implication seems to be stocks jump at the open then trail off during the day. Thing is most of this is only obvious in retrospect and by the time you realize it the opportunity is gone because it’s now widely known.
As someone who doesn't know much about stocks and trading - is it normal to keep stocks for only evening or evening -> morning, what about morning -> morning, or even longer timespans? Or is this the difference between trading and investing?
I believe when people talk about trading and investing the main difference is the time horizon.
See Swing Trading, Day Trading etc. for shorter-term time-horizons. Keeping stocks only intra-day would be Day Trading (generally).
There are lots of people on the internet who say they can 'teach' you day-trading. Don't do it unless you have a very high risk tolerance, i.e. are willing to lose it all and walk away. Even then there's probably better things to do with your money.
Re: They say that stocks go down during the day and up at night
#25Earlier quoted context omitted.
Could you please explain this complexity? ELI5 even? You never settle the trades? Dividends etc? Hmm maybe I am 5... Edit: ok yep so I guess what if they repeated the analysis leaving some time around open/close for chance of trades to settle, would the effect disappear or would this chance beef the key factor for the reported gain?
Settlement is when you actually own the stock you bought and the seller actually gets your money. That happens a couple of days after the trade. In the meantime it’s just “as if” but not quite and that has practical consequences. For example you can’t take your money out of the brokerage account until it’s really there.
Thanks!
I was figuring this out just now as well thanks.
The analysis is flawed if it doesn't include this as the gains they describe seem essentially unrealisable.
So is the real issue that maybe someone has immediate settlement when the rest don't?
Re: They say that stocks go down during the day and up at night
#26Earlier quoted context omitted.
Simply put, day means if you bought on the market open and sold at the close. Night means if you bought on the close and sold on the open. The implication seems to be stocks jump at the open then trail off during the day. Thing is most of this is only obvious in retrospect and by the time you realize it the opportunity is gone because it’s now widely known.
As someone who doesn't know much about stocks and trading - is it normal to keep stocks for only evening or evening -> morning, what about morning -> morning, or even longer timespans? Or is this the difference between trading and investing?
It’s just parasitism on top of the legitimate activities of the market (capital allocation).
People who benefit from it (market administrators, traders) like to pretend it increases the liquidity of the market and that it’s a good thing. How you appreciate this argument generally directly depends of how much you stand to gain from it being accepted.
Re: They say that stocks go down during the day and up at night
#27Earlier quoted context omitted.
> I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading? While we're at it, I have a related question: why do the exchanges even "open" and "close"? Surely in our globalized digital economy, it's not just "day" and "night" that are meaningless, but the very concept of "opening hours" itself.
Probably due to labor unions.
Actually, it’s mostly down to the computers now. Having downtime is advantageous to the primary customers of the stock market. If you have the same “off and on” times as your competitors you can ensure your operations are structured in such a way that you don’t have to deal with a whole class of systemic risks, no need to roll out up’s to FPGA powered acceleration devices live where the smallest mistakes can cost money for every second they are wrong let alone if they are broken … to more mundane things like being able to reprocess the data trading data and analyse performance vs other prediction models… effectively the downtime is for the high frequency traders and the algorithm traders and all the players paying for direct access to the stock market for their computer systems… it’s effective a digital cage match from bell ring to closing time and it’s in the best interests of all the competitors to only have to fight the same 8-12 hours in the cage, lest it becomes a much more expensive 24/7 war of attrition.
Re: They say that stocks go down during the day and up at night
#28Since the article is not very informative, and it's a real rabbit hole to try to track this stuff down across all the linked articles etc. and as I don't even really care about stocks and the market, I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading?
> I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading? While we're at it, I have a related question: why do the exchanges even "open" and "close"? Surely in our globalized digital economy, it's not just "day" and "night" that are meaningless, but the very concept of "opening hours" itself.
Historically, it's because exchanges were real places that people went to, and it would be expensive and pointless to run them all night.
These days, there is a trend towards opening hours getting longer (eg [1]).
But there is still value to limited hours. Off the top of my head:
1. Liquidity gets concentrated. If there is a fixed amount of end-user demand (inflows into pension funds, oil production to hedge), then shorter hours means sort of 'denser' trading, which in turn means more quantity on the books, tighter prices, and better efficiency.
2. Trading is still done under human direction, or at least under human supervision, so shorter hours are less demanding on staffing. It's possible to run a productive soybean trading desk with two people at the moment. You'd need six people if trading was round the clock, and those people aren't cheap. Or else desks don't trade the whole day, and they miss out on opportunities, and other participants get less competition, and so worse efficiency.
3. Closing the market gives participants time to do various kinds of admin related to trading. Options markets close earlier than their corresponding futures markets, so that options market makers can get their position cleanly hedged. Bond markets close before repo desk traders go to the pub, so that bond trades can get financed.
[1] https://www.eurex.com/resource/blob/2845114/ae56de359f7a578e...
Re: They say that stocks go down during the day and up at night
#29Earlier quoted context omitted.
> I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading? While we're at it, I have a related question: why do the exchanges even "open" and "close"? Surely in our globalized digital economy, it's not just "day" and "night" that are meaningless, but the very concept of "opening hours" itself.
Probably due to labor unions.
Yea, and people who drive electric cars!
Re: They say that stocks go down during the day and up at night
#30Earlier quoted context omitted.
> I am only left with one question which I did not find answered anywhere yet - what exactly does day and night mean in the context of the whole world trading? While we're at it, I have a related question: why do the exchanges even "open" and "close"? Surely in our globalized digital economy, it's not just "day" and "night" that are meaningless, but the very concept of "opening hours" itself.
Probably due to labor unions.
I'd be interested to know how you came to that conclusion.