Last Updated on 14 March, 2021 by Samuelsson
Whether you are a stock trader or not, you probably know that the stock market does not open every day of the week and that this can affect the number of days one can trade the market in a year. In view of that, you may be wondering how many trading days in a year.
For the U.S. stock market, the average number of trading days is about 252 days, but the number may vary from year to year, as not every year has 252 trading days. For example, the 2020 trading year consists of 253 trading days, but 2021 will have 252 trading days.
It is not enough to know the number of trading days, which is why, in this post, we will discuss why the number of trading days varies, who sets the trading schedule, and other factors that may affect how often you trade. But, first, let’s understand what a trading day is.
What is a trading day?
For any given stock market, a trading day is any day the stock exchange is open for business. Normally, the market is open during the weekdays, from Monday to Friday, unless there is a holiday or a major event that prevents the market from opening. On any given trading day, the market is open during regular trading hours (RTH), as opposed to electronic or extended trading hours (ETH).
The regular trading hours on Nasdaq Exchange and the New York Stock Exchange (NYSE) is from 9:30 AM Eastern Time to 4:00 PM Eastern Time. The trading day normally opens with the ringing of the opening bell and closes with the ringing of the closing bell. When the closing bell rings, all share trading ends and is frozen in time until the next trading day begins.
While stock exchanges are typically open from Monday to Friday, there are some instances where the market may not open even though it’s a weekday. For example, 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. There are also several other special circumstances that 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 year for the U.S. market, and how do you calculate it?
On average, the number of trading days in a year is 252 days, which translates to 21 trading days on average each month and 63 trading days per quarter. However, the number of trading days is not constant; it varies from year to year. For instance, in 2019, there were 252 trading days out of a total of 365 days in that year, while 2020, being a leap year (366 days) had 253 trading days. In 2021, barring any new circumstances, there will be 252 trading days, but this number may change if there are new events and state functions.
Generally, this is how to calculate the number of trading days in a year in the U.S. market:
Number of days in the year — number of weekends — number of holidays = Total trading days in the year
There are 104 weekend days (Saturday and Sunday) and 9 market holidays when the stock exchanges are closed. So, the calculation for the total number of trading days will be as follows:
365 days — 104 days — 9 days = 252 days
Who sets the trading schedule?
Each country has its own trading schedule for the stock market and is set by the main stock exchange in that country. In the United States, it’s the NYSE that sets the trading schedule, while most of the other exchanges follow the NYSE’s schedule for both days and hours traded. Prior to 1952, the NYSE scheduled trading days to include a two-hour trading day on Saturdays in addition to Mondays to Fridays, but since 1952, the NYSE and other U.S. exchanges have maintained a Monday through Friday trading schedule, which starts 9:30 a.m. through 4 p.m. Eastern Time.
These trading hours are based on the New York time zones, so people from different time zones who want to trade on the NYSE have to trade when the NYSE’s trading day schedule. People can trade in these exchanges remotely using electronic trading platforms, but it has to be during the scheduled market hours. Since the NYSE is open from 9:30 AM to 4:00 PM ET, anyone outside of the Eastern Time Zone will have to access the market during that time. For someone in California, for instance, the market hours would be from 6:30 AM to 1:00 PM.
Why does the number of trading days vary from year to year?
As we stated earlier, the number of trading days tend to vary a little from year to year. For most years, it would be 252 days, but it can also be 253 days or even 251 days depending on different factors. Some of those factors that can affect the number of trading days in a year include the following:
- The holidays
- Major events
- Leap year
There are many federal public holidays in the US, but the stock market doesn’t close on all federal holidays. For example, the market doesn’t close on Veterans Day and Columbus Day, but it also closes on Good Friday, which is not a federal government holiday. In all, the stock market observes nine holidays in a year, and they are as follows:
- New Year’s Day (January 1st)
- Martin Luther King, Jr Day (The third Monday of January)
- Presidents’ Day (The third Monday in February)
- Good Friday (The Friday before Easter Sunday)
- Memorial Day (The last Monday of May)
- Independence Day (July 4th)
- Labor Day (The first Monday in September)
- Thanksgiving Day (The fourth Thursday of November)
- Christmas Day (December 25th)
When any of the holidays fall on a weekend, the stock market will observe the holiday either on the preceding Friday or the following Monday.
As we stated above, there are officially nine market holidays in the U.S. market. So, the question is: if the same nine holidays are observed each year, why does the number of trading days vary from year to year? Well, the answer lies majorly in the number of weekend days in the year falls.
For most years, there are 104 weekend days in a year, but sometimes, it can get more than that, depending on where the first weekend of the year falls. If the year starts on a Saturday, there will be 106 weekend days in that year, which would reduce the number of trading days, even if the year is a leap year.
Sometimes, the stock market closes in response to major events of national importance, which are not anticipated in the trading calendar for the year. For example, the U. S. stock market closed on December 5th, 2018 to mark the death of former president George H.W. Bush. Also, in 2012, the market closed for two days in response to Hurricane Sandy, while in 2001, it closed for four days following the terrorist attacks on September 11th, 2001.
Every four years is a leap year, which has an extra day. This extra day, if it falls on a weekday, increases the number of trading days in the year. For example, 2020 was a leap year, and it had 253 trading days. The only thing that can make a leap year not to add an extra trading day is if the year starts on a weekend, especially Saturday.
Do you trade on all trading days?
Now, you know the number of trading days in a year, but can you possibly trade on every one of those days? Even if you are a day trader, that will be quite unlikely. Certain factors will normally limit the number of trading days you trade in a year, and some of them are as follows:
- Trading style
- Unexpected situations
- Losing streaks
If your style is day trading, you will probably want to trade on every trading day if you can. Swing traders and position traders, on the other hand, may not always find good trade setups every day, so they are unlikely to trade on all trading days.
Trading is a very stressful job, especially if you are a day trader who has to monitor his trading screen all the time to find good trade setups and manage open positions. It is quite helpful to take some time off and go on vacation. This, obviously, reduces the number of trading days you are active in the market.
There are certain situations, such as important family reunions, going to the dentist, falling ill, or any other event, that can prevent you from trading. When that happens, you won’t be able to participate in the market.
It is a normal practice to take some days off when you have a catastrophic loss or are on a losing streak. This helps you to cool off and regain control of your trading emotions.