Power hour refers to the last hour of the regular trading session, from 3:00 PM to 4:00 PM Eastern Time. This period sees a surge in volume and volatility as traders close positions, institutions rebalance portfolios, and momentum builds into the close. For day traders who know how to read the action, power hour offers some of the best opportunities of the day.
What Makes Power Hour Special
The last hour of trading has distinct characteristics:
- Second-highest volume: After the opening hour, power hour sees the most trading activity
- Institutional rebalancing: Funds adjust positions before the close
- MOC orders: Market-on-close orders create predictable volatility
- Position squaring: Day traders close positions, adding to volume
- Clear trends: Intraday trends often accelerate or reverse definitively
Why it matters: The closing price is the most important price of the day. It determines margin requirements, appears on charts, and influences overnight sentiment. Institutions fight for favorable closes, creating tradeable moves.
Understanding Power Hour Dynamics
The Momentum Effect
Stocks that have been trending all day often see that trend accelerate during power hour. Winning positions attract more buyers, while losing positions see increased selling as traders capitulate. This creates a "rich get richer" effect.
The Reversal Effect
Conversely, extended moves sometimes reverse sharply during power hour as profit-taking kicks in. Traders who rode a trend all day lock in gains, while contrarian traders step in at extreme levels.
The Squeeze Effect
Short sellers who are underwater may be forced to cover before the close to avoid overnight risk. This buying pressure can cause explosive upward moves in heavily shorted stocks.
Power Hour Trading Strategies
1. Trend Continuation
The most straightforward power hour strategy is to trade in the direction of the day's trend:
Trend Continuation Setup
- Identify stocks up more than 3% and holding above VWAP
- Wait for a pullback to support (e.g., 9 EMA on 5-min chart)
- Enter on the bounce with stop below recent swing low
- Target the day's high or a new high
2. Range Breakout
If a stock has been consolidating during midday, power hour often provides the breakout:
- Mark the high and low of the afternoon range
- Trade the break in either direction
- Volume confirmation is essential
- Stop-loss on the opposite side of the range
3. Failed Breakdown Recovery
When stocks break key support but quickly recover, it signals that sellers are exhausted:
- Watch for a break below a key level
- If price reclaims that level within 15 minutes, go long
- Stop below the breakdown low
- Target the day's VWAP or higher
4. End-of-Day Fade
Extended moves into power hour sometimes reverse. This contrarian strategy requires discipline:
Fade Setup
- Stock is up 10%+ on the day with no fundamental news
- Price is extended far above VWAP
- Volume is declining despite price making new highs
- Enter short on a bearish candle pattern
- Stop above the high of day
Reading Power Hour Price Action
Pay attention to these signals during the last hour:
Bullish Signs
- Price holding above VWAP with increasing volume
- Higher lows forming on the 5-minute chart
- Buyers stepping in at each dip
- Market makers lifting offers
Bearish Signs
- Price failing to hold VWAP, selling into rallies
- Lower highs forming on pullbacks
- Increasing selling volume on red candles
- Bids getting hit repeatedly
The MOC Imbalance
At 3:50 PM ET, the NYSE publishes Market-on-Close (MOC) imbalances. This tells you whether there are more buy or sell orders waiting to execute at the close:
- Buy imbalance: More buy orders than sell orders; price may rally into close
- Sell imbalance: More sell orders than buy orders; price may drop into close
- Large imbalances: Can move stocks several percent in the final minutes
While individual traders cannot easily access MOC data, you can observe the price action after 3:50 PM to infer the imbalance direction.
Risk Management for Power Hour
Power hour requires specific risk considerations:
- Time your exits: Close day trades before 3:55 PM to avoid the chaotic final minutes
- Watch for reversals: Sharp moves in the last 10 minutes are common
- Reduce size: Volatility increases, so position size should decrease
- Set hard stops: The market moves fast; use automatic stop orders
- Avoid the last 5 minutes: Unless you're experienced, the final minutes are unpredictable
Pro tip: Many successful day traders make power hour their primary focus. They watch the market all day, identify the strongest and weakest stocks, then execute during the last hour when trends are clearest.
Comparing Morning and Power Hour
How does power hour compare to the morning session?
| Factor | First Hour | Power Hour |
|---|---|---|
| Volume | Highest | Second highest |
| Volatility | Most erratic | More directional |
| Trend clarity | Developing | Established |
| Best for | Breakouts | Trend continuation |
Stocks to Watch During Power Hour
Focus on these types of stocks:
- Day's leaders: Stocks up big on volume often continue into the close
- Day's laggards: Stocks down big may see short covering
- High relative volume: At least 2x average volume by 3 PM
- Near key levels: Stocks testing daily highs/lows often break during power hour
- Sector leaders: If tech is strong, watch the strongest tech stock
Common Mistakes
Avoid these power hour pitfalls:
- Trading into the close: Exit by 3:55 PM to avoid unpredictable MOC orders
- Ignoring the overall market: Individual stocks follow SPY during power hour
- Chasing late: If you missed the move, do not chase at 3:45 PM
- Holding overnight accidentally: Set reminders to close day trades
- Overtrading: Take 1-2 high-quality power hour setups maximum
Analyze Your Power Hour Performance
Pro Trader Dashboard breaks down your trading performance by time of day. Discover whether power hour is your strongest period and optimize your schedule accordingly.
Summary
Power hour offers exceptional trading opportunities for those who understand its dynamics. The combination of institutional activity, position squaring, and trend acceleration creates predictable patterns. Focus on trend continuation strategies, respect the increasing volatility, and always exit before the chaotic final minutes. With practice, power hour can become the most profitable part of your trading day.
Continue your day trading education with our guide to first hour trading or learn about VWAP trading strategies.