We will begin by looking at some basic investing principles, before reviewing two trading techniques or indicators used by stock pros.

Minimize your transactions

Readers guided by the principles of our site typically trade infrequently. Why?

• First, because we do not believe in trading based on market timing or stock picking in a futile attempt to beat the market; see Beat the Market? on our website.
• And secondly, because the more you trade the higher your level of  expenses of all kinds (including commissions); in general, see Costs of investing on our site.

But there will be times when you have no choice but to trade.

When it becomes necessary to trade

Here are examples where even readers guided by  the principles of our site must occasionally trade:

• You open your first account with a broker, and you begin to invest your capital.
• You earn new money (dividends, interest, maturities, proceeds of redemption of securities etc..) which you decide you to invest.
• You decide to rebalance your portfolio by selling securities of one category and buying securities of another category.
• You decide to sell securities to realize a tax loss and reinvest in similar securities similar (taking care not to repurchase the same securities within 30 days to avoid seeing your loss treated as a superficial loss and denied by the tax authorities, at least Canada).
 
Your objectives when trading
 
So what should be your objectives by trading?
 
Seek to trade at the fair market price. But here is a reminder: do not choose your stocks or timing based on their current price. Recent price declines (for buyers) or increases (for sellers) do not mean that there is a good trading opportunity. In the long term prices reflect all available information and react to new information, which by definition is not predictable. And in the short term, in the absence of new information changes in market prices are random. That said, investors may be unhappy if, in a volatile and fluctuating market, they buy (sell) a security at a price significantly higher (lower) than the price a few minutes or even a few seconds before or after. Is this logical? Can investors protect themselves to minimize this risk?

A goal which we can all agree is minimizing our trading costs, which consist of commissions we pay to the executing broker, the bid/ask spread, and  impact costs. Let’s look at each of them.

Transaction costs
 
• Your commission fees will be higher or lower depending on whether you use a discount broker (low) or a full service broker (highest). Market orders (the most typical of trades) should not vary by time of day. But if you place an order with limit price (typically, these are for one day only), it is best done early enough in the trading day to increase the odds of it being executed on the same day; if it is only partially executed, and you place a new order the next day,  you may pay a second commission.
• Transaction costs (the spread bid / ask). According to Bernstein (The Investor's Manifesto, 2010, p.60), these often cost more than your commission costs. Can they vary by time of day? We have not found anything on the subject.
• Impact fees are a measure of change in the price of a stock as a result of an order so large that the market is affected. These costs can be significant for an institutional investor, but are typically negligible for a small investor.

Now let’s look at what trading professionals say about trading and the time of day.