The average number of trading days for U.S. markets is about 252 days, but not every year has 252 trading days. For example, the 2020 trading year consists of 253 trading days. In the United States, the New York Stock Exchange sets the trading schedule.
This post will discuss who sets the trading schedule, why it varies from year to year, and everything else you’ll need to know when determining your trading schedule.
Who Sets the Trading Schedule?
The schedule for the stock market varies a bit from country to country. We will primarily focus on the trading schedule of the United States, though we’ll touch on how foreign and non-equity markets vary later in this post.
In the United States, the New York Stock Exchange sets the trading schedule. Most other exchanges in the United States follow the New York Stock Exchange’s schedule for both days and hours traded. Since 1952, the New York Stock Exchange (and therefore most other U.S. exchanges) has consisted of a Monday through Friday schedule of 9:30 a.m. through 4 p.m. Eastern Time. Between 1887 and 1952, trading also included a two-hour trading day on Saturdays.
Why does the stock market no longer trade on weekends? Part of the original reason for eliminating Saturday trading was that floor traders didn’t have to work on the weekends. Since most trades now occur electronically, this no longer applies, but there are two other reasons why stock trading doesn’t happen on the weekends.
The first reason is that most money managers don’t work on the weekends. Though trades can be carried out without money managers, the lack of money managers would cause the market to become less liquid. This would, in turn, likely create a more volatile market. The second reason is that two days without trading can provide time to respond to the crisis. For example, during the financial crisis of 2008, the U.S. government used weekends as an opportunity to discuss and implement various bailouts and other economic responses.
Beyond weekends, the stock market also closes for nine holidays a year. These holidays include:
- New Year’s Day
- Martin Luther King, Jr Day
- Presidents’ Day
- Good Friday
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving Day
- Christmas Day
If any of the holidays fall on a weekend, the stock market will observe the holiday either on Friday or Monday. For example, in 2020, Independence Day (July 4th) falls on a Saturday. The market, therefore, observes the holiday on the preceding day (Friday, July 3rd).
This schedule is relatively similar to the holiday schedule for the federal government. The federal government observes Veterans Day and Columbus Day, while the U.S. stock market does not. The only other difference is that the U.S. stock market celebrates Good Friday, while the federal government does not.
The U.S. stock markets also close early, up to three times a year. These include July 3rd, the day before Thanksgiving, and Christmas Eve. On these days, the market closes three hours early, meaning it is open from 9:30 a.m. to 1 p.m. Eastern Time.
If the same holidays are observed each year, why does the number of trading days vary from year to year? The answer is that the trading days calendar varies from year to year, primarily due to where the weekends fall each year.
Where the weekends fall on the calendar can also impact how many trading days occur each month. For example, even though May has 31 days and June has only 30 days, in 2020, May has only 20 trading days while June has 22.
There is also a leap year every four years, which further impacts the calendar. Even if a leap year falls on a weekend, as it did in 2020, it still affects the schedule by pushing forward all future holidays and trading days by one day. This often results in an additional trading day in the year. As alluded to above, 2020 has 253 trading days — one more than the average.
Another reason variations occur is that while the trading calendar is usually followed quite strictly, in certain instances, trading may halt in response to significant events.
The stock market is occasionally closed in response to major events. These closing are not included on the trading calendar since they occur in response to unforeseen circumstances. These market closures are incredibly rare and occur only in response to significant events of national importance.
Most recently, the U.S. stock market closed on December 5th, 2018, to mark the death of former president George H.W. Bush. The U.S. market also closed in 2012 for two days in response to Hurricane Sandy. One of the most extended market closures in response to a significant event was the four-day stock market closure following the terrorist attacks on September 11th, 2001.
As previously mentioned, the stock trading schedule for foreign markets does not look the same as it does for the United States. Each stock exchange schedule varies based on the local country’s regional holidays. This means even on days when the U.S. exchanges are closed, trading may still occur on foreign exchanges. Reversely, on days when the U.S. exchanges are open, foreign exchanges may be closed due to local holidays. This is valuable information for all foreign investors to keep in mind.
Even countries that observe similar holidays may find them on different days. For example, Canada also celebrates Thanksgiving but does so on another day than the United States. In Canada, Thanksgiving is celebrated on the second Monday of October instead of the fourth Thursday in November. Therefore, stocks listed on the Toronto Stock Exchange still trade on American Thanksgiving but not on Canadian Thanksgiving.
Foreign markets are not the only markets that have a different schedules.
While most exchanges in the United States follow the trading schedule set by the New York Stock Exchange, not all do. One notable exception is the United States bond market, which follows a calendar closer to the federal government’s holiday schedule. Unlike the New York Stock Exchange, the U.S. bond market observes Columbus Day and Veterans Day.
While the impact is relatively minimal, the holiday schedule does affect the stock market. Often, trading volume decreases during certain holidays, especially those that frequently involve travel or taking time off. During certain holidays there also tends to be a slight drop in business news, which further encourages a decrease in trading volume.
A few patterns have emerged around various trading holidays.
While not always the case, the S&P 500 (an index commonly used to track the performance of the stock market) tends to see stock prices dip on the final trading day of the calendar year and increase on the first trading day of the new year. This is partly due to the financial implications of tax-loss harvesting and the rebalancing of portfolios.
The opposite often occurs around Good Friday, which has historically seen stock prices increase the trading day before and decrease the trading day after. Losses have often occurred both on the trading day before and after Presidents’ Day, while gains have been seen on the trading days both before and after Thanksgiving and Christmas.
While these gains and losses around stock market holidays have happened in previous years, that does not mean they will continue. If investors expect these gains and losses, it may cause the reverse to occur.
Of the 365 days in a year, only about 252 are trading days. That means there are almost one hundred days that U.S. exchanges are closed each year. Thankfully, a good trading strategy is based more on using the days you have than how many days you can trade each year.