It’s All About Timing – Everything I Know About Small Caps Times of Day, Backed by Data

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I set down and thought to myself – what would be my question to someone who have huge amount of 1st day gappers data. What is an interesting fact I didn’t know I was missing until I found it myself? And the answer was – how small caps act in different times of day.

Every strategy I have today is extremely effected by time of day. some strategies will work amazing in the morning, and some will work only after 4 hours into the trading day.

So in the following post I will present to you interesting facts about different times of day.

High of day – when will the squeeze stop??

Timing the end of squeeze is a nerve wracking task. We always trying to time the top for great RR, but when we fail to do so the upward continuation can kill us. Time of day can come to our help, as a very interesting pattern unveil itself when plotting high of day to time of day histogram.

HOD times. y axis is number of instances and x axis is time of day.

We can see clearly that the majority of stocks got their highs at 9:30 – 9:45. So looking for shorts against those highs seems like the right thing to do. Statistically, when shorting against 9:45 high will give you a safe level to risk off of.

For those of you starting their shorts at pre market, here is an histogram with PM included.

HOD histogram, PM included

We can see that a lot of the tops will happen between 7:00 to 8:45, but shorting PM is risky as still the vast majority of instances reached their HODs around the open. This was an eye opening histogram for me, as I barely short PM anymore (there is a profitable edge there, but small win rate), and it inspired me to find a PM long strategy. Profits for the long strategy had to be taken around the market open of course, as this is where HOD most probably is.

Low of day – where should you cover the short?

Next important question is, when is the low of day? when should you cover your position or at least take some profits out? The following histogram shows when does LOD tends to be during the day (also why zombie hour is not such a good rule in my opinion).

LOD times during the day

As you can see, most LODs will be around 9:30 to 9:45. Next spike for LOD instances will be at end of day. So if he stock breaks 9:45 low it will most probably head down until EOD. Looking at this histogram got me really patient about where I want to take profits on stocks that works best.

Interesting special cases

2 things I found affecting HOD times are low amount of outstanding shares and recent reverse stock splits. When o/s is less than 3 million, the following histogram is plotted:

We can see that compared with the general case, stocks with less than 3 million o/s tend to postpone their HOD time, with less PM HOD and more HODs at 9:15 to 9:45.

Regarding reverse stock split – here is a histogram plotting all instances that had a reverse stock split within the last 50 days:

Again we see much less HODs in PM, way less HODs at 9:15 to 9:30 where most of them moved to 9:30 to 9:45. So in general we can say that low o/s or recent reverse stock split means a stronger stock that will top out a bit later than the general case.

Conclusion

I would recommend to play with those findings and see if different times of day means different results for your strategies. After watching the above, some aspects of my trading got a lot better and your’s can as well.

2 comments
  1. Niv, have you tested this in 2020/2021 to see if the times have changed? I’ve seen a lot of 4am-6am runners this past year.

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