When it comes to stock market trading, you can pretty much do trades at daytime, but the biggest rewards happen at night.
According to analysts or consider as the professional stock broker, they say that it is due to what is called as the gap which is simply the difference in stock returns during the day and the share returns after the market is closed for the night.
There is really no strict calculation when it comes to this, however, data shows that there are indeed more profits if you just hold on to your shares, sleep for the night, and come back the next day having earned more than just regular day trading.
That is why this concept of a gap is something that buy-and-hold investors would really love. But, this topic is actually something that is intriguing because analysts really cannot predict why this happens and what factors contribute to it. But, there are some plausible explanations.
Apparently, when people trade late in the day because they’re somehow forced to, they turn panicky and therefore, they might lose more money than they should because they’re buying stocks due to a heightened emotional state.
Leaving the market and holding on to your stocks for the night and trading it early during the next market opening is key if you want to maximize your profit. This is because there are more orders happening late during the day (because of panic buying) and you could leverage this to earn more.
Prices can be more erratic due to that simple fact and buy-and-hold investors can really increase their gains just by being more patient.
Now, this day and night gap needs further studies, but the message is a little bit clear to the layman: that panic buying during late in the trading day can cause prices to be erratic so they might end up selling their stocks for a much cheaper price.
The more patient traders can buy these stocks by the next day and again, this would lead to them having maximum profits as opposed to these panicky traders.
This is not to say, however, that day trading is bad. It is actually good that you trade during the day just so that the market will retain its good ebb and flow. But, keep in mind the reality that this gap in stock returns does exist, so if you’re thinking of earning more by spending less, you’re better off holding on to your stocks until the next day.
What can we take away from this? Well, if we are to look at the data and the results that analysts have come up with, trading it slowly and steadily will generally leave you scot-free as you will not experience any problems when it comes to profits.
If you are panicky and you frequently trade and not maximizing your stocks, you could end up with far less.
So to reiterate, slow and steady is the way to go and frequent panic trading is not good for you.