If you’ve been trading stocks, you probably know that the stock market is subject to a seasonal effect in that at different times of the year, month or even week, share prices can increase or drop.
So, not only do you need money to start day trading, but you also need to know how many trading days approximately there are in a year, as well as the most volatile months for trading stocks.
Number of trading days per year
Traders can also buy or sell stocks in the pre-market and after-hours market, though the largest numbers of shares are traded during normal hours.
Pre-market trading session takes place between 8:00 a.m. to 9:30 a.m. ET. After-hours stock trading session takes place between 4:00 to 6:30 p.m. ET.
Some investors like to trade in these extended trading hours because they give them a leg up on the competition by responding quickly to news releases that occur outside the regular trading sessions.
But how many trading days are there in a year? Well, technically there are 252 trading days out of a possible 365 in any given year in the U.S. stock market, which breaks down into about 4.85 trading days a week.
This calculation is broken down into the following inputs:
Number of days in the Year – Number of Weekends – Number of Half Trading Days – Number of Market Holidays = Total Trading Days per Year
A market holiday is any nonweekend day when the Nasdaq Stock Market or the New York Stock Exchange (NYSE) close for the day.
Usually, that holiday is something like New Year’s or Christmas. If a public holiday falls on a Saturday or Sunday, market closures are governed by two rules:
- When the holiday falls on a Saturday, the markets will close on the preceding Friday.
- When the holiday falls on a Sunday, the markets will close on the subsequent Monday.
On some holidays, or days close to them, the stock market remains open.
The markets have traditionally closed for all or part of their session for the funeral of a U.S. president, including in 1994 when they closed for a full day for Richard Nixon’s funeral and in 2004 following the death of Ronald Reagan.
The most recent observation was December 5, 2018, after the passing of President George H.W. Bush.
The stock market can also remain shut for reasons other than holidays, such as serious technical issues with an exchange’s trading platform, terrorist attacks, and extreme weather events.
Stock Market Holidays 2020
As previously mentioned, regular trading hours for the Nasdaq and the NYSE are Monday through Friday from 9:30 a.m. ET to 4:00 p.m. ET. The stock markets remain shut during public holidays and close at 1:00 p.m. ET on some days.
The following are the market holidays when the NYSE and the Nasdaq are all fully closed in 2020.
- Wednesday, January 1 — New Year’s Day
- Monday, January 20 — Martin Luther King Jr. Day
- Monday, February 17 — Presidents’ Day
- Friday, April 10 — Good Friday
- Monday, May 25 — Memorial Day
- Friday, July 3 — Observance of July 4, Independence Day, which falls on a Saturday
- Monday, September 7 — Labor Day
- Thursday, November 26 — Thanksgiving Day
- Friday, December 25 — Christmas Day
Stock markets will close at 1:00 p.m. ET on the following dates in 2020:
- The stock markets close early, at 1:00 p.m. ET, on Black Friday, which lands on November 27.
- The NYSE and Nasdaq close at 1:00 p.m. ET on Christmas Eve, which takes place on Thursday, December 26.
Now that we know how many public holidays there are in 2020, let’s use the formula we mentioned earlier to calculate the number of trading days this year.
366 (number of days in 2020) – 104 (number of weekend days in 2020) – 9 (market holidays) = 253 days.
Most volatile months of the stock-market calendar
While October has historically been positive, it has the distinction of being known as the most volatile month of the year to trade stocks.
Since 1928, the percentage spread between the S&P 500’s closing high and low during the month of October has been a staggering 8.25%.
For the other months since 1928, the index has averaged an intra-month spread of 6.41%.
According to Macro Risk Advisors, October has historically been the most volatile month as the CBOE Volatility Index (VIX), which measures the 30-day expected volatility of the US stock market, tends to peak during the month.
Why is October so volatile?
Some analysts believe October’s heightened volatility can be traced back to the stock market crashes of 1929 and 1987, both of which happened in October.
Others also tend to cite the uncertainty created by presidential and midterm elections that happen in early November. Volatility also often spikes in August, September, and November and then recedes in December to close out the year.
However, the price of shares often tends to do well in January because traders have more fresh capital available or feel more optimistic about the new year. Stocks also tend to rally before a three-day holiday.
Riskiest trading days of the month
There are also at least 6 recurring trading days in the U.S. stock markets where it is almost certain volatility will be higher than usual. They include:
- The 1st day of the month
- The last day of the month
- Jobs report on the first Friday of every month
- Earnings announcement days (for specific stocks)
- Option expiration Friday
- Federal Open Market Committee (FOMC) days (aka “Fed Days”)
Knowing how many trading days there are in a year is essential if you want to become a successful stock trader. This helps you decide when is the right time to buy and sell your stocks.
Figuring out the number of trading days in a year, month, or week is especially important if you are day trading stocks, since you need to buy and sell your stocks at exactly the right moment to earn profits.
To sum up, knowing when the stock market will be opened enables traders to properly plan their trades in order to achieve better results.