The opening and closing bell is a ceremonial act that takes place at the start and end of each trading day on Wall Street. It has been a tradition on Wall Street since the 1880s. It signifies the passage of time but is there any real importance to this ceremony?
In this article, we will discuss the history and significance of the opening and closing bells on Wall Street.
What is the opening bell?
Simply put, the opening bell is the signal that indicates the start of trading on a stock exchange. It signals to traders and investors that the market is open and ready for business. The actual physical bell is located on the trading floor and is usually rung by the exchange's executives.
However, sometimes non-profit organizations will have the privilege of ringing the bell to mark a special occasion. Companies that IPO on the day can also often have their executives ring the bell as the team celebrates their shares being publicly available.
There's no strict rule as even Jim Cramer has rung the bell before, but it also doesn't mean anyone can just run up to the bell and start ringing it. Remember that the opening bell has significance to many Wall Street enthusiasts, even if we are living in an electronic age where it can be easy to forget the bell's existence.
So, before you criticize this traditional practice, think about the long history and tradition associated with the ringing of the opening bell. The lessons throughout the entire history of the NYSE can be reflected upon each time the bell is rung.
Most traders won't be on the floor to witness or hear the bell these days, but that doesn't mean the act is any less special. It's a time-honored tradition that has been passed down for generations, and it's a reminder of the importance of the markets.
What is the opening bell time?
The time of the opening bell for the NYSE (New York Stock Exchange) is 09:30 AM Eastern Time. It's the same time that markets open for trading. 9:30 AM also gives traders ample time to prepare in the mornings and enough time throughout the day to make their desired trades.
What is the closing bell?
The closing bell is similar to the opening bell except that it happens at the end of the trading day. The bell signals that all trades must be completed as its sound echoes the trading floor. Basically, after the closing bell, all trades are settled and no more trades can be made for that day.
The closing bell can be the most stressful sound or relieving one depending on how your day went. If you've had a good day then the closing bell signals that it's time to take your profits and go home.
If you didn't quite perform or hit the quota that you wanted to then the closing bell is a reminder that there's always tomorrow. Just like the opening bell, the closing bell is usually rung by the exchange floor manager.
They will use a handbell or electronic bell to signal the end of trading. The sound is then broadcasted throughout the trading floor and also to the public via television or radio. The closing bell might not be surrounded by as much excitement but it's just as important to the trading process.
What is the closing bell time?
4:00 PM Eastern Time is the time when the closing bell will ring. This is when trading is closed for the day. As a retail trader that's not on the floor, you can set an alarm on your phone or computer to remind you that the market is about to close. It might not be the real thing, but it can simulate the experience and help you get into the habit of closing your trades for the day.
Why do they ring the bell during stock market opening and closing?
The stock market floor can be quite hectic and chaotic, so the ringing of the bell is a way to signal that trading is about to begin or end. It helps to bring a sense of order to the trading day.
There is a lot of yelling and without a loud bell to notify everyone that the trading day has either started or ended, it would be even more chaotic. Without it, people might start trading earlier or late which would lead to more confusion, disputes, and potential losses.
This is the main reason why the bells are used, to keep everyone on the same schedule. It's the most practical explanation as to why the bells are used and ring at specific times. Tradition is also another reason.
When the stock market first started, there were no electronic tickers or computer screens. So, the bell ringing was the only way to signal to everyone in the room that trading was starting or stopping.
Nowadays, we have electronic tickers and computer screens that show us the time, so there's really no need for a physical bell to ring. But, it has become such a tradition that it would be hard to get rid of it at this point. It's a tradition with a practical use case so there's little chance that it will disappear anytime soon.
How to trade the opening bell
The first thing you need to know is what stocks you want to buy or sell. You can't just buy or sell any stock, you need to have done your research ahead of time. By having a plan in place, you aren't just gambling but rather strategically looking for arbitrage in shares of a company.
You can plan for the opening bell by calling your broker or placing an order online. If you're trading online, you'll need to enter the ticker symbol of the stock you want to buy or sell. You'll also need to set the number of shares and price limit.
Once you've done that, all you need to do is wait for the opening bell to ring. If you're calling your broker, you'll need to tell them the ticker symbol, number of shares, and price limit. They'll then place the order for you and notify you once it's been executed.
It's important to note that not all brokers offer pre-market or after-hours trading. So, you'll need to check with your broker to see if they offer this service. If not, you'll need to wait until the market opens to place your trades.
Self-directed trading platforms often allow you to place your order before the opening bell but they won't execute until after the market opens. There are many different strategies when it comes to trading the opening bell.
Some consists of buying shares of a company that has good news coming out before the market opens. This could be an earnings report, FDA approval, or some other type of news. Another strategy is to buy shares of a company that has been beaten down in the market and is trading at a discount.
By getting in a position before the market realizes that the company is undervalued, you stand to make a profit when the market corrects itself. Being patient and waiting for 30 minutes to one hour to see how the market is trading can also be a good strategy.
By waiting, you'll get a better idea of which direction the market is moving and can make more informed decisions about your trades. For example, let's imagine that you don't indicate how the market is going to open.
But after 30 minutes it becomes clear that the market is going to have a down day, you can trade appropriately based on this new information. These are just a few of the many strategies that traders use to take advantage of the opening bell.
It's a good idea to do some research and find a strategy that works best for you. Remember, the most important thing is to have a plan and stick to it. By being disciplined and following your plan, you'll increase your chances of success.
In summary, the opening and closing bell are important times during the trading day. They signal the beginning and end of trading and give traders a chance to enter or exit the market. There are many strategies that traders use to take advantage of the opening bell.
By being aware of the bell's existence, you won't be startled when you hear it ring and can instead focus on your trading. Don't forget to celebrate the fun of being with this community as you watch the bell ring to start the trading day. Who knows, maybe one day you will have the privilege of ringing the bell yourself!