Why is the open of the day more volatile compared with the rest of the day?

[Guest]

Was wondering what the reasons are that the opening hours are more volatile than the rest of the day?

[KurtLoeblich 101]

Hey Lenny!

The market open is typically the most volatile for a number of reasons:

1)  Any orders that were placed at the varying brokerages over night/after market close are going to be processed once the market opens

2) Any news that could theoretically have an impact on the stocks price will usually come out after the market close or before the market open and decisions are going to be made on it

3) Day Traders/momentum traders typically only trade for the first hour or so and once their volume dries up, it does reduce the overall volatility (least influential by any means but worth mentioning regardless)

[Guest]

Hey Kurt,

Awesome, thanks for your answer 🙂. I understand, your question just leaves me with one more question.

You mentioned this:
"1)  Any orders that were placed at the varying brokerages over night/after market close are going to be processed once the market opens"

So how does this work exactly? For example will these brokerages execute the orders straight away at 09:30 when the market opens? or will the brokerages execute the orders gradually the first hour? Because I might be wrong, but the orders that have been placed after hours abd over night are not getting processed all at ones right? 

Looking forward to your answer

Lenny