Eight Items That Impact Daily Trades

There are a number of things that can impact an investor's entry (buy) into or exit (sell) out of a given stock and/or sector. Depending on the investor and his or her goals and investing time frame, the importance of timing the entry will differ. Obviously, the shorter the time frame the more important the entry; specific entries matter little to long-term (five years or more) investors.

Eight items that can materially impact the average day's trading.

1. Overseas Market/Economic Action

The US market.

2. Economic Data

Ex, Interest Rate, Exchange Rate

3. Futures Data

They start trading before the stock market and are a very good indicator of what the stock market opening will look like.

Investors should check to see if futures contracts are trading higher or lower in pre-market trading. This will give them a better feel for where the index they are tracking might be headed "after the open".

4. Buying at the Open

Buying or selling stock at the open of the market might not be a good idea.

The opening hour of trading is basically the first time that most market participants have to enter or exit the stock, which can easily produce higher-than-average trading volume. These market participants are reacting to the myriad of news stories that came out between yesterday's close and today's open, which includes major market news events like economic reports and political changes.

5. Midday Trading Lull

There is typically a drop off in trading (meaning the volume of transaction) at noon as most of the major news events are out in the market. During this lull, stock prices can often lose some ground.

When this happens, stocks can be purchased at a cheaper price at 1pm than they could at, say, 11am. Again, this is important to know, as this can affect both entry and exit points.

6. Analyst Upgrades/Downgrades

An analyst may disseminate an intraday note that can have a significant impact on a given stock and/or sector. As a tip, remember to scan financial websites or watch business reports on television.

If a large company has just been upgraded or downgraded, try to judge the potential impact on certain industries and the market as a whole.

For example, if a major semiconductor stock were downgraded by a well-known analyst due to slackening demand for that company's products, it might be reasonable to assume that other smaller players may be experiencing similar trends. It might also be logical to assume that shares of computer makers (which purchase large numbers of semiconductors) might be impacted as well.

7. Web-Related Articles

All investors should try to peruse the web and visit major news portals throughout the day, to see if there are any potentially market-moving news stories in the public domain. Be careful to avoid sites that give recommendations based on the stocks they own.

8. Friday Trading

Even if you're a "buy and hold" investor, a significant number of retail and institutional traders typically liquidate their equities on Friday (usually in the afternoon), so they don't have to hold their positions and assume risk through the weekend.

It means that stocks can and often sell off Friday afternoon during the last few hours of the trading day, if for no other reason than traders are looking to go home "flat" (without positions on their books). Keep this in mind on Fridays if you are trying to find a favorable time to enter or exit a stock position.

Bottom Line

While company-specific events can have an impact on equity prices, there are a number of other factors that can affect your shares as well. Savvy investors should be aware of them.

From Investopedia

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