The US stock market is a network of stock exchanges. The 3 major exchanges are NYSE, NASDAQ, and NYSE American (formerly AMEX). All your wagers are on stocks traded on these major exchanges. All trades are computerized, matching buyers and sellers in milliseconds (for your trades) or microseconds (for high-volume institutional investors).

Economics

A stock is created by a company taking money from the public in return for shares of stock. This public offering is a transfer of funds from investors to the corporation. No net societal wealth is created. A corporation may generate economic value, but the stock market itself does not.

Shares only trade when one investor buys from another. This is, again, a transfer of funds. If the seller sells the stock for more than its purchase price, the seller profits off the buyer. Financial gain is only at the individual level.

A stock market is a zero-sum game of wealth. Profits always come from someone else putting their money into the market. Stock trading does not create capital.

Institutional investing is founded on this zero-sum principal that few retail investors comprehend: you make money in the stock market by taking money from someone else. The stock market is a predatory ecosystem.

The US stock market operates in distinct trading sessions during weekdays. Each session has own dynamics and access rules.

The regular session is usually 9:30 am to 4:00 pm Eastern Time (ET), Monday through Friday. You invest during the regular session. For minuting, you close any open position before the regular session concludes, as post-market sessions can be treacherous, owing to their low volume and institutional profit-taking.

The premarket session is 6:00 am to 9:30 am ET. Owing to low volume, liquidity is low, resulting in high volatility. Similar in volatile price swings is the after-hours session: 4:00 pm to 8:00 pm ET.

Some brokers offer overnight trading: 8:00 pm to 3:50 am. Trades in an overnight sessions carry the next day’s date. Volume is even thinner overnight than after hours and premarket sessions.

Strong trends dominate from the opening bell of the regular session, offering a bounty for minuting. Retail traders rush in, reacting to overnight news. Institutional investors execute bulk orders at the open, rebalancing portfolios. This concentrated volume creates momentum and directional bias. Exchanges use a call auction to match buy/sell orders at the open. This often results in large imbalances that push prices strongly in one direction. High-frequency algorithms, designed to capitalize on the volatility, reinforce trends through rapid execution and liquidity-taking.

After the initial surge of the first 15–20 minutes or so, liquidity stabilizes. Spreads tighten and volume disperses. This reduces momentum and makes price action more sensitive to smaller order flows.

After about a half hour (~10:00 ET (Eastern time)), countertrend participation steps in. Traders who missed the initial move or see it as overextended wade in. This introduces chop and reversals.

Market sentiment diverges. As more participants digest the morning move, conflicting interpretations emerge, leading to indecision and range-bound behavior.

Trends weaken and chop becomes more pronounced. This is both cause and effect as intraday algorithms switch modes, going from momentum to mean-reversion or volatility harvesting. As algo dominates the market, this changes the character of price action.

By the mid-morning (10:30 to 11:30 ET), the market may have settled into a groove. If the initial move was strong and nothing disrupts that, continuation is likely; otherwise, reversals are common. Institutional activity begins to dominate, especially in large-caps and ETFs.

Common inflection points occur after opening volatility fades (~10:30 ET), at the start of the afternoon session (~13:30 ET), and during the final hour (~15:30 pm). Trend reversals are notable. For example, a morning rally stalls and turns into a sell-off. There are breakouts from consolidation. Following contrary program narratives, volume surges as algos compete.

Impact news during the day injects uncertainty, disrupts early trends, boosts or downs certain stocks, sectors, or the market as a whole.

Lunch (11:30 to 13:30 ET) serves a lull: the slowest part of the day, as traders take breaks and institutional desks pause. Volume and volatility drop significantly. Price action flattens. Chop and random ranging are typical. There is often a “lunch effect,” with the mid-day lull followed by a modest performance uptick if the day is not a downer.

Momentum rebuilds in afternoon. Volume picks up. There are breakouts from lunchtime ranges. Breaking news affects the trends, either accelerating of flattening them.

Volume surges in the final hour, which is known as the “power hour.” Institutional investors tend to dominate the power hour, rebalancing and setting their positions. Often, randomness reigns. High-frequency trading spikes occur. Volatility increases, often with sharp moves or reversals. Mutual fund and index fund managers settle their accounts for the day near the close.

There are 3 order types: limit, market, and melo. A market order is an instruction to trade a stock immediately at the current price. A limit order is an instruction to trade a stock only at a specified price or better. A melo is a marketable limit order: a limit order that is immediately filled.

Orders are executed on a priority basis. Trades with the closest bid-to-ask match are made for limit orders. You get the price specified, or better, for a limit order.

Market orders get sloppy seconds. The trade price of a market order may be several cents (per share) away from where you thought the order was placed. It is not unusual to see market orders at a price that is well above or below the high or low of a bar.

You almost always get a better price with a limit order than a market order. Never enter with a market order. To immediately open a position, make a melo rather than a market order.

Melo

A buy limit order set above the current price is marketable, meaning that it executes immediately. Conversely, a sell limit order set below the current price is marketable.

A buy melo typically fills at the current market bid price, acting like a market order with a price ceiling. A sell melo fills at the best ask price, acting like a market order with a price floor. What this means is that a melo typically gets filled at a price better than a market order, but not as good as a limit order.

Melo are especially useful for a volatile stock.

Partial Fill

Large orders may not always be fully filled at one time. An order may be partially filled at one price and the rest filled at another price. Limit orders are more prone to partial fills than market orders, since a limit order only executes at a specific price or better.

Mentally, minuteability comes from recognizing regime. Mechanically, minuteability manifests from the order book.

In terms of movement, the order book is built of 2 order types: active and passive. Active orders attack, deciding when price moves and how far price travels before friction slows momentum. Passive orders defend, feeding friction to price movement and setting where price gets stuck.

An active order takes liquidity by executing immediately against whatever rests in the book. An active order crosses the spread, causes displacement, and initiates impulses. In short, active orders move price. A market order is an active order. The hybrid melo acts as a market order.

Passive orders provide liquidity by lurking in the book, waiting to be triggered at their set price levels. Passive orders absorb displacement, thus creating an obstacle to impulses. Passive orders hold price in place. Limit orders are passive orders.

Minuteability sprouts from a supportive environment: one that affords taking quick, modest, profits. Opportunity density is determined by the balance between active liquidity and passive liquidity.

Active orders create impulses when sweeps are strong enough to displace resting liquidity. Impulses form cleanly. Trend steps extend without hesitation. Velocity is stable. Geometry is more missile than rocket. Minuteability is high.

Passive orders are impulse killers. Passive orders absorb sweep velocity, deforming trend geometry. Opportunity evaporates as passive orders pile up.

Grinding happens when active and passive orders roughly balance. Impulses are shallow, continuation fragile. During a grind, opportunity is spotty and minuting hazardous. Minuting in a grind relies on luck, whereupon the bets made are gambling, not dragonfly.

The tape gets sticky when prices cling. Sticky tape is a symptom of thick resting liquidity (a high number of passive limit orders) and weak sweep liquidity (relatively low active market orders). Sticky tape forms when passive orders overpower active orders. Price moves only when active orders overpower passive orders. To try to minute in sticky tape is to invite loss.

Commonly, order book conditions have a pervasive tonality in the market during a session, ranging from vibrant to tentative: the tape spectrum ranging from flowing to sticky.

Automated trading is also known as algorithmic trading, or algo for short. Algo is a method of executing trades using software that automatically executes orders based on predefined rules.

TradeStation was a pioneer in providing for algo available to retail traders. TradeStation calls a defined set of algorithms a strategy. MultiCharts followed in TradeStation’s footsteps, creating a trading platform that works with numerous brokers.

Automated trading dominates stock trading. About 85% of American stock trades are software generated. For some stocks, algo accounts for over 95% of trades. Because they hew to a predefined index, allowing only slight, temporary deviation, ETFs are essentially algo stocks.

What that practically means for regular stocks (not ETFs) is that the enthusiasm inherent in human investors is dampened by battling bots (competing algorithms) that bet against each other.

The combination of algo and stop hunting can create tremendous jerkiness in stock movements, especially in those with lower volumes that financial institutions take an interest in.