Last Updated on 14 October, 2021 by Samuelsson
If you’ve been trading stocks, you probably know that the number of trading days in a month matters a lot to traders. Not only does it tell day traders the number of days they can possibly pull money out of the market but is also used as a smoothening factor in many indicators and strategies — for example, the Bollinger Bands and the famous Turtle strategy. But how many trading days are in a month?
On average, the number of trading days in a month is 21 days for the U.S market, but the number varies from month to month. For example, in 2021, January and February have 19 trading days, while March has 23 trading days, which is the most for any month.
In this post, you will learn the following:
- What trading days are
- How many trading days are in a month on average and how to calculate that
- Why the number of trading days in a month varies
What are trading days?
Trading days, for a given stock market, are days the stock exchanges are open for business. In the US, for example, the market is usually open during the weekdays — Monday through to Friday — unless there is a holiday or a major event that prevents the market from opening. On the Nasdaq Exchange and the New York Stock Exchange (NYSE), the regular trading hours each trading day is from 9:30 AM Eastern Time to 4:00 PM Eastern Time. The market opens with the ringing of the opening bell and closes with the ringing of the closing bell. After the closing bell, trading ceases on the floor of the exchange until the next trading day but may still go on via ECN channels.
Although the stock market typically opens on weekdays, there are some instances where the market may not open even though it’s a weekday. When there are public holidays or days scheduled for a state function, such as a state funeral of a head of state, the market doesn’t open. Furthermore, some other special circumstances could lead to a shortened trading day, whereby the market closes at 1:00 PM, instead of the usual 4:00 PM.
How many trading days are in a month?
For the U.S. stock market, the number of trading days in a month is 21 days on average, but the number varies from month to month. For example, in 2021, January and February have 19 trading days, while March has 23 trading days, which is the most for any month.
There are generally two ways to calculate the average number of trading days in a month. The first one is to count the number of trading days in each month and find their average. For 2021, the number of trading days in each month are as follows:
- January: 19 days
- February: 19 days
- March: 23 days
- April: 21 days
- May: 20 days
- June: 22 days
- July: 21 days
- August: 22 days
- September: 21 days
- October: 21 days
- November: 21 days
- December: 22 days
The average of the above is 21 days, which is the average number of trading days in a month.
The other method is to calculate the number of trading days in a year using this formula:
Total trading days in the year = the number of days in the year — number of weekends — number of holidays:
365 days — 104 days — 9 days = 252 days
Then, divide the number by 12 months:
252 days /12 months = 21 days per month
Why does the number of trading days in a month vary?
The actual number of trading days in each month varies because of these factors:
- The number of weekends: Where the weekends fall in any particular month has an impact on the number of trading days in that month. Many months have four weekends, but if a month starts with a weekend, it may have five weekends, which effectively reduces the number of trading days in that month — for example, even though May has 31 days and June has only 30 days in 2021, May has only 20 trading days while June has 22.
- Market holidays: A month like January has two market holidays — New Year’s Day and Martin Luther King, Jr Day. No wonder, there were only 19 trading days in January 2021 as it also has five weekends.
- Unexpected events of national importance: The market closes in response to major, unexpected events of national importance; when such happens, the month will have fewer trading days. For example, on December 5th, 2018, the U.S. market closed to mark the death of former president George H.W. Bush.