Power hour in the stock market is a phenomenon that has been noticed by traders and investors all over the world. It should be noted that this isn’t 100% rule that is present all the time, it’s not as if during power hour the market goes up and this is the secret holy grail that traders can take advantage of. Rather power hour is the movement in the market that is MOST volume heavy and trading activity is the highest during this time.

In short power hour can be described as a time in the day where there is the most market activity found, with both volume and price movement. This can also be described as the point in the day where the larger money (institutions) gets the most active, and as we may or may not know that happens twice throughout the day.


When is Stock Market Power Hour

Since power hour is when there is the most activity in the stock market, we can divide power hour into two different periods. The morning power hour session and the afternoon power hour session. If you’ve ever noticed volume between 9:30 AM EST time and 10:30 AM EST you’ll find that there are a lot of active participants in the markets. Conversely, the same happens around 2:45 PM EST to the close of the session 4:00 PM EST. Now the later power hour can start earlier and can extend for more than an hour. This is due to the LARGEST money in the market acting around the open and the close, big money doesn’t trade the middle of the session. Institutions want an opening print and a closing print.

The morning power hour session is the flush of traders, and investors coming into the market to price in any premarket news or any news from the overnight session. Now at this point big money has already entered the market, pre-market that is, which is what causes gaps, and other traders/investors may be getting into the market as a continuation. Which isn’t always the best move.

In the afternoon session, we start to see more volatility in the stock market. The professional traders stepped in during the morning session, ran away for the afternoon session, and are now back for the last hour of the day. This is the act of closing trades or opening new trades to end the session.

Take a look at the chart of the overall market, SPY (S&P500 ETF) at the beginning and at the end of the day, even though the movement may not be SUPER exaggerated, just take a look at the volume. The yellow box denotes the morning power hour session and the green box the afternoon power hour session. Notice how the power hour can even start at 2 PM EST time.

Stock Market Power Hour


News & Power Hour

There are a few news events that traders have to look at when trading stocks during power hour, these can affect either or ends of the power hour band, morning or afternoon session. These events can signal an even more volatile and opportunistic power hour should they be understood before the event.


Earnings Reports

Earnings come out quarterly, outside of market hours, either before or after. The largest companies, mainly tech, will report after the bell. Meaning that in anticipation of earnings the afternoon power hour session in the markets can be affected. Those that are reported after the bell can have some sway in the next morning’s power hour session as well. The premarket earnings can directly affect that trading day’s power hour. Usually, financials are first to report earnings and they report pre-market so it’s something to watch out for. Knowing when earnings come out is key for power hour trading as well.


Federal Reserve & Economic News

There is a lot of major news that comes out premarket; jobs numbers, consumer sentiment, inflation rates, GDP numbers and other reports. These can really shake things up for the first hour of the power hour day (morning session).
This happened on Tuesday, April 12th, 2022, when we had an inflation report (CPI data 8.5% vs 8.4%) higher than expected but fairly in line with expectations and the market rallied into the morning, only to fail and pop after. A lot of movement.

Below is an image of the SPY during just that session.

Federal Reserve

You can also get a Fed announcement, usually (almost every month) around 2:30 PM EST which starts into the afternoon session power hour that gets the market moving. The Fed releases statements about the monetary policy which gives traders an insight into what is expected in the coming months. This presents volatility and movement in the overall market and individual stock names, mainly the tech names.


Options & Futures Expiration (Quad Witch or Triplewitch)

The Quad Witch or the Triple Witch is a market event where the options and futures expire. The Quad Witch happens each quarter, where index futures, index options, stock options, and stock futures all expire. The Triple Witch is all of that except for the index futures. Meaning a lot of positions on that Friday will stop trading by the end of the day. Which causes, closing out trades, rollovers, and new trades to transpire which is a massively active event into the afternoon power hour session. You can read more about the quad witch or Freaky Friday here. 


Will Stocks Go up or down During Power Hour?

The question is now, do stocks go up or down during the power hour? Now this is something really hard to understand and anticipate. The usual movement in the afternoon power hour session is the reverse of what had been going on during the day. Typically we do see a slight lean to the bullish side during power hour for the markets to close on a higher note. However, there is no exact science if stocks go up or down. It is based on market movement and volatility more so than anything else. So you can trade the power hour using different trading strategies, but rather than trying to anticipate where the market is going to go, read the current movement and jump on that trend.


Strategies During Power Hour

We can divide the different strategies into three blocks:

  • Scalping
  • Day Trading
  • Swing Trading

You can find out more about these strategies and how to trade them with options here.


Scalping Power Hour

Scalping is a really short-term movement strategy where you take advantage of the market moves quickly and is good for power hour trades, you don’t fall in love with the trade, you’re in and out. You are looking to take small traders over a short period of time, profiting off multiple green trades rather than holding out larger scale moves.

This strategy has a few minutes holding period throughout and can be difficult, you need to execute your trades quickly and dump the position when it starts going against you. You can turn a scalp into a day trade if it goes in your direction with little drawdown and continues to run. This strategy would require more experience and understanding when you’re wrong you need to get out!


Day Trading Power Hour

These are longer-term scalps, you are still expected to close out the trade before the session ends, however, typically day traders end up holding these positions as long as the trend is active, which can be hours throughout the day. This trading style is a little more relaxed than scalping and you can continue the move as long as the trend holds out, you may take fewer trades than a scalper throughout the day. However, I found that a day trading sweet spot is 3-5 trades a day. When it gets more volatile during power hour you may be out of your trade faster due to your profit or loss being hit quicker.


Swing Trading Power Hour

The swing trading approach for power hour is usually based on the afternoon session of power hour. You don’t want to open a swing in the morning off the back of the news, typically, unless the news is so strong that the trend is expected to hold for days. The swing trade is taken in anticipation that the stock price is going to trend for a few days to weeks. Meaning you hold the position well beyond a day. The afternoon power hour session is best for this as you can see what the stock did throughout the day and avoid the unfavorable fluctuations of that day.


Power Hour Trading in the Stock Market: Takeaways

Power hour trading in the stock market is considered a really good opportunity by many traders, being able to make due of quicker market movements in a single hour of the day and avoiding the chop in the middle.

Beware that power hour trading can get volatile and harder for newer traders, meaning that you can be risking more than expected with these volatile moves if you are unseasoned.

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The information contained in this post is solely for educational purposes and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO AcademyTM is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.