As the trading session turns into the final stretch, the market often enters a distinct phase of price activity. The final hour, sometimes referred to as the “power hour,” is when institutional traders, retail participants, and algorithmic strategies converge to execute end-of-day orders, adjust positions, take profits, and offset losses.
For traders armed with a full day of data—including volume profile, support and resistance levels, and trend analysis—this period can provide valuable trading opportunities.
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Most traders tend to focus on the opening of the trading session, when volatility increases, but there are opportunities at the end of the trading session as well. On a recent livestream, Olivia Voz of TradeToClose talked about how volume is usually highest at the open and close of the daily trading session, with lower volume between—often referred to as the “volume smile.”
Learn more as Olivia discusses her unique approach to trading opportunities near the close of the trading session using volume gaps, profile patterns, and other complementary charting indicators.
Key topics covered:
- Why trade the close?
- How can traders use volume data to identify key trading levels?
- What are volume gaps?
The Significance of the Final Hour
The last hour of trading is often influenced by a mix of factors:
- Order flows: Many institutional investors and funds finalize their trades based on daily benchmarks, adding to liquidity and volatility.
- Volume concentration: Volume tends to spike as traders rush to flatten out their positions before the close.
- Trend resolutions or reversals: Intraday trends may either gain momentum or encounter significant resistance as participants react to key levels at the end of the day.
For futures traders, this hour can serve as a microcosm of the total day’s activity, providing clues about market sentiment and the chance to act on well-defined setups based on information accumulated throughout the session.
Preparing for the Final Hour
By the time the last hour approaches, you should already have a roadmap built from the day’s data.
- Volume profile analysis: Volume profile is an invaluable tool for identifying price levels where significant activity occurred during the day. Key areas to consider:
- Point of control (POC): The price level with the highest traded volume can act as a magnet for prices or a pivot point for reversals.
- High-volume nodes (HVNs) and low-volume nodes (LVNs): HVNs represent zones of acceptance, while LVNs (volume gaps) highlight areas of rejection.
- Support and resistance levels: Daily highs and lows, pivot points, session VWAP (volume-weighted average price), and Fibonacci retracements are crucial in determining levels where price is likely to react. Use these levels to frame potential entry and exit points.
- Trend confirmation: The final hour is not the time to guess the trend—it’s the time to react based on confirmed trends or rejections of key levels. Indicators like moving averages, RSI, and MACD can help validate your trading ideas.
Risk Management for Late-Session Trading
Trading in the final hour comes with heightened volatility. To capitalize on this and manage risk, traders should:
- Set clear stops and targets: With the day’s levels well defined, place stops just outside key levels, and use realistic targets based on intraday range.
- Monitor volume: Low volume at key levels may signal hesitation, while a volume surge confirms conviction.
- Keep position sizing conservative: End-of-day moves can be swift; keep position sizes manageable and appropriate to your account to avoid unnecessary stress.
Not Just a Race to The Finish
The final hour of trading is not about speculation; it’s about executing informed decisions based on the patterns and levels that have developed throughout the day. By combining tools like volume profile, trend analysis, and support and resistance, traders can approach this period with more confidence. While there are potential opportunities at the close, disciplined risk management remains the cornerstone of potential success during this high-stakes trading window.
When done right, trading the close isn’t just a race to the finish—it’s a calculated pace based on a day’s worth of information, data, and preparation.
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