End-of-day trading: what is it and how does it work?

What is end-of-day trading?

End-of-day (EOD) trading refers to an order made by a trader to execute a position by the time markets close.

EOD trading involves trading a stock or another security that floats during a specified trading period. That trading period depends on the security and the market in which it trades.

You can place several types of EOD orders, which can either constitute a buy order or a sell order. They can be market orders, limit orders or stop orders. Unlike good-'til-cancelled (GTC) orders, EOD trades typically execute by the close of markets and don't carry on into the next trading session.

A limit order specifies the price at which you're willing to buy or sell a security, regardless of the time, while market orders are the best available price for a security at the time of execution. Stop orders are instructions to your broker to enter or exit a trade if the market price rises or falls to a specified level to mitigate possible losses.

For example, imagine you want to trade shares in a company with a market price of ¥30. You can place an EOD limit order with a price target of ¥34. You can also place an EOD stop at ¥28 to mitigate substantial losses.

If the stock's price doesn't hit its limit or stop prices by the end of the day, the trade will execute at its closing price.

What time does end-of-day trading start?

You can engage in EOD trading at any time, but you need to be aware of the trading hours of the market that you want to operate in to do so.

For example, the stock market operates at different times to forex and commodities markets, and markets operate at different hours depending on time zones.

Forex markets and commodities markets are typically open 24 hours a day on weekdays, making EOD orders more complex.

The following are trading times for the UK market:

• Japan stock market hours: 9am to 3pm JST (lunch from 11.30am – 12.30pm)
• Japan forex market hours: 9am to 3pm JST (lunch from 11.30am – 12.30pm)
• Japan commodities market hours: 8.45am to 3.15pm and 4.30pm to 6am

These are other popular times for stock trading in other countries:

• New York Stock Exchange (NYSE): 9.30am to 4pm ET
• Frankfurt Stock Exchange: 9am to 5.30pm CEST
• Shanghai Stock Exchange (SSE): 9.30am to 11.30am and 1pm to 3pm CST
• UK Stock Exchange: 8am to 4.30pm GMT

What are the benefits of end-of-day trading?

More accurate analysis

EOD trading involves taking a view of the entire trading day to establish patterns in an asset's price movement. This can give you more information about the stock (as opposed to day trading) based on short-term supports and resistances.

Better risk management

Because EOD orders typically involve limit or stop orders, your risk is likely to be reduced to your own boundaries.

More flexibility

EOD orders can be used to enter or exit positions at specific prices, which can provide more flexibility in trading strategies. For example, you can use limit orders to buy or sell at specific prices, or you can use market orders to execute trades at the best available price.

Lower transaction costs

Because EOD trading typically only involves one order, it has fewer transactions than a regular day trading strategy. This can cut back on commission fees and act as a more affordable alternative.

Less time commitment

An EOD strategy allows you to pick stocks based on a predetermined price or its price at the end of the day, which gives you more trading flexibility in a limited timeframe.

What are the risks of end-of-day trading?

Missed opportunities

While EOD trading can help protect you from risk when executed correctly, it can also be a barrier to bigger gains. For example, news about a stock could send its price much higher than the limit order you placed on it. A day trader may be able to react to this news and be left in a better position than an EOD trader.

Incomplete information

EOD trading relies on making trading decisions with incomplete information about how the day will proceed. While you might take a position based on technical analysis, surprise news or wider volatility may affect your position. This could result in you missing out on bigger returns or suffering big losses.

Reduced potential profits

Because EOD trading involves holding onto a position for longer, it can diminish the potential for profits. This is because the longer the position is held, the more the price of the financial instrument needs to move in your favour to generate a profit.

Potential for reduced liquidity

EOD trading can bring with it the potential for reduced liquidity. Fewer people tend to operate outside core trading hours, which can complicate your position when the markets close. This may increase bid-ask spreads and make it harder to execute an order at your desired price.

How to get started with end-of-day trading

We offer a variety of markets to help you start your trading journey using the EOD strategy.

CFD trading is a means of trading assets on a leveraged basis. When trading using CFDs, you’ll enter a contract to exchange the difference in price from the point at which the contract is opened to when it is closed.

It's important to remember that trading with CFDs comes with added complexity and risk attached to leverage. Your position will be opened at a fraction of the value of the total position size – but you can gain or lose money much faster than you might expect. You can even lose more than the initial deposit paid as potential profits and losses are magnified to the full value of the trade.

It's also good to keep in mind that past performance isn’t an indicator of future returns.

Here's how to get started with EOD trading with us:

1. Create a trading plan
2. Choose your preferred market and identify your opportunity
3. Create an account or practise on a demo account
4. Set your trade size and manage your risk
5. Open and monitor your position

End-of-day trading summed-up

• An end-of-day (EOD) order involves taking a position on an asset that will close by the end of the trading day
• EOD trading usually involves placing stops and limit orders that expire at the end of the day unless filled
• The time for EOD trading depends on the market you operate in
• EOD orders are popular because they require less time commitment and remove the market noise that occurs in intra-day trading
• EOD trading may result in missing out on big swings in prices based on news that affects an asset's price