The first 30 minutes of every trading day are the most dangerous minutes of the day for me. I generally don’t trade during this time.
I live in the Central Time Zone so for me that’s between 8:30 and 9:00 am. During this period there’s usually a rush of buy and sell orders that have been stacked up since the previous close by part time investors that spent the prior evening doing their research and putting in their buy and sell orders. It's a period in which prices can be managed the most, and usually to someone else's benefit. It also gives time for any imbalances to level out and real trading starts to occur.
I’m not worried about the long term traders that are putting in limit orders, I’m concerned with those traders that are reacting to last night’s news events. The ones that have been in the chat rooms the night before and discovered a level of "internet consensus" with what other traders are going to do when the market opens. They’re the dangerous ones.
During that first 30 minutes there’s often a disorderly push and pull among traders as those buys and sells come tumbling through in a disorderly manner. It usually takes about 15-20 minutes for the markets to rebalance and the professional traders start pushing the market up or down.
Once I begin to feel that the market has found an equilibrium I start to look for trend breakouts. These are literally intraday highs or lows and they signal which way the market or an individual stock is probably heading for the day. This literally tells me if I should execute a trade or wait for a better entry.
I have used this strategy more times than I can remember. It’s simply waiting for a trend to form before jumping into one side of a trade or the other. It often gets me into a trade in the right direction and has saved me from making thousands and thousands of mistakes.
Most traders understand this phenomenon but others may not. Perhaps this information can save someone else from jumping in too soon and regretting it.
Good Luck and Good Trading.
I live in the Central Time Zone so for me that’s between 8:30 and 9:00 am. During this period there’s usually a rush of buy and sell orders that have been stacked up since the previous close by part time investors that spent the prior evening doing their research and putting in their buy and sell orders. It's a period in which prices can be managed the most, and usually to someone else's benefit. It also gives time for any imbalances to level out and real trading starts to occur.
I’m not worried about the long term traders that are putting in limit orders, I’m concerned with those traders that are reacting to last night’s news events. The ones that have been in the chat rooms the night before and discovered a level of "internet consensus" with what other traders are going to do when the market opens. They’re the dangerous ones.
During that first 30 minutes there’s often a disorderly push and pull among traders as those buys and sells come tumbling through in a disorderly manner. It usually takes about 15-20 minutes for the markets to rebalance and the professional traders start pushing the market up or down.
Once I begin to feel that the market has found an equilibrium I start to look for trend breakouts. These are literally intraday highs or lows and they signal which way the market or an individual stock is probably heading for the day. This literally tells me if I should execute a trade or wait for a better entry.
I have used this strategy more times than I can remember. It’s simply waiting for a trend to form before jumping into one side of a trade or the other. It often gets me into a trade in the right direction and has saved me from making thousands and thousands of mistakes.
Most traders understand this phenomenon but others may not. Perhaps this information can save someone else from jumping in too soon and regretting it.
Good Luck and Good Trading.
Print 
PDF
RSS Feed
