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| How Many Trading Days In A Year? (photo: cdn.simplertrading.com) |
What is Trading ?
Trading refers to the exchange of goods or services between two parties, typically involving the exchange of money for a product or service. In finance, trading typically refers to the buying and selling of financial assets such as stocks, bonds, commodities, and currencies with the aim of making a profit.
There are different types of trading strategies, such as day trading, swing trading, and position trading, that vary in terms of the length of time for holding an asset, the frequency of trades, and the level of risk involved.
Traders can use various techniques and tools to analyze markets and identify potential opportunities, such as technical analysis, fundamental analysis, and quantitative analysis. They can also use different trading platforms and instruments, including online brokerages, futures contracts, options, and exchange-traded funds (ETFs), to execute trades.
Overall, trading can be a lucrative but risky activity that requires a good understanding of financial markets, risk management, and discipline.
The U.S. stock market typically has an average of 252 trading days per year, although this number can vary from year to year. For instance, 2020 had 253 trading days, while 2021 is expected to have 252 trading days.
If you're familiar with the stock market, you likely know that it's not open every day of the week, which can impact the number of days available for trading within a year. As a result, you may be curious about the total number of trading days in a given year.
Merely knowing the quantity of trading days isn't sufficient, which is why we will delve into the reasons behind the variation in trading days, who determines the trading schedule, and other factors that could influence your trading frequency in this article. However, before we proceed, let's establish the definition of a trading day.
What is Trading Day ?
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| photo: Alamy |
Trading day refers to any day on which a stock exchange is open for business. Generally, stock markets are open from Monday to Friday, but they may be closed due to holidays or significant events. During regular trading hours (RTH) on a trading day, the market is open for trading, as opposed to electronic or extended trading hours (ETH).
The regular trading hours for the Nasdaq Exchange and the New York Stock Exchange (NYSE) are from 9:30 AM Eastern Time to 4:00 PM Eastern Time. The trading day usually starts with the ringing of the opening bell and ends with the ringing of the closing bell. Once the closing bell has rung, trading for the day stops and is paused until the following trading day begins.
Although stock exchanges typically operate from Monday to Friday, there are occasions when they may not open, even though it is a weekday. For instance, the market may be closed due to public holidays or days scheduled for a state function, such as a state funeral for a head of state. Additionally, there may be several other unique circumstances that could result in a shortened trading day, in which the market closes at 1:00 PM instead of the usual 4:00 PM.
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How many trading days are in a year for the U.S. market, and how do you calculate it?
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To determine the total number of trading days in a year for the U.S. market, the following formula can be used:
Number of days in the year - number of weekends - number of holidays = Total trading days in the year
In the U.S., there are typically 365 days in a year, but the number of trading days varies due to weekends and holidays. Weekends consist of 104 days (52 Saturdays and 52 Sundays) in a year. Additionally, the U.S. stock market is closed on certain holidays, which can also affect the number of trading days.
On average, there are 252 trading days in a year for the U.S. market, which means there are approximately 21 trading days in each month and 63 trading days in each quarter. However, this number can fluctuate based on the number of holidays and weekends in a given year.
For example, in 2019, there were 252 trading days out of a total of 365 days in the year, while 2020 had 253 trading days due to it being a leap year. In 2021, there are expected to be 252 trading days, but this number may change if there are any additional holidays or events that affect the stock market.
Who sets the trading schedule?
The trading schedule for the stock market in each country is established by the primary stock exchange in that country. In the United States, the NYSE (New York Stock Exchange) is responsible for setting the trading schedule, and most other U.S. exchanges follow its lead on both the days and hours traded. Prior to 1952, the NYSE scheduled trading days to include a two-hour trading day on Saturdays, in addition to Mondays to Fridays. However, since 1952, the NYSE and other U.S. exchanges have followed a Monday through Friday trading schedule, from 9:30 a.m. to 4 p.m. Eastern Time.
These trading hours are based on the time zone of New York, which means that traders in different time zones must trade during the NYSE's trading day schedule. While people can trade on these exchanges remotely using electronic trading platforms, it must be done during the scheduled market hours. As the NYSE is open from 9:30 AM to 4:00 PM ET, anyone outside of the Eastern Time Zone will have to access the market during that time. For instance, someone in California would have market hours from 6:30 AM to 1:00 PM.
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Why does the number of trading days vary from year to year?
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| photo: Adobe Stock |
As previously mentioned, the number of trading days in a year can vary slightly from year to year. Although the average number of trading days is 252, it may be either 253 days or 251 days in certain years due to various factors. Some of these factors that can affect the number of trading days in a year are:
- Holidays
- Weekends
- Major events
- Leap years
In the United States, there are several federal public holidays, but the stock market does not close on all of them. For example, the market remains open on Veterans Day and Columbus Day, while it closes on Good Friday, which is not a federal government holiday. Overall, the stock market observes nine holidays throughout the year, which are:
- New Year’s Day (January 1st)
- Martin Luther King, Jr Day (The third Monday of January)
- Presidents’ Day (The third Monday in February)
- Good Friday (The Friday before Easter Sunday)
- Memorial Day (The last Monday of May)
- Independence Day (July 4th)
- Labor Day (The first Monday in September)
- Thanksgiving Day (The fourth Thursday of November)
- Christmas Day (December 25th)
As previously mentioned, the U.S. market has nine official market holidays each year. However, the number of trading days can vary from year to year, and the reason for this is mainly due to the number of weekend days in the year.
Typically, there are 104 weekend days in a year, but this number can increase depending on where the first weekend of the year falls. For example, if the year starts on a Saturday, there will be 106 weekend days in that year, which would result in a reduction of trading days, even if the year is a leap year.
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| photo: www.analyticinsight.net |
Having learned about the number of trading days in a year, is it possible to trade on every single one of those days? As a day trader, that's highly unlikely due to various factors that limit the number of trading days in a year. Some of these factors include:
- Trading style: Depending on the type of trading style you use, such as swing trading or position trading, you may not trade on every trading day. For instance, if you are a swing trader, you may only hold positions for several days, while a position trader may hold positions for weeks or even months.
- Vacations: Traders also take time off for vacations or personal reasons, which reduces the number of trading days.
- Unexpected situations: Sometimes unexpected events may happen that disrupt the normal trading routine, such as illness or a family emergency, which could limit the number of trading days in a year.
- Losing streaks: Traders may decide to take a break from trading to avoid losses during periods of losing streaks, which can also limit the number of trading days in a year.
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Source: https://therobusttrader.com
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