Every weekday I turn on my computers at about 8:30am and see what my watchlist is doing before the market opens. For a long time, I recorded what the market was doing about an hour before the open, at the open, at noon and at the close. I had hoped to gain an edge for trade entry and exit.
I had hoped to learn when might be the best time of day based on pre-market and the open to place a trade at the best entry price and to exit a trade for the best exit price. Over the course of a year, a few extra dollars on each trade placed can add up to a lot of money. Those few extra dollars could more than pay all of my commissions. Well, I was not able to find an advantage.
I could not find a consistent correlation between the pre-market, the open, noon and market close. I guess if I could, others would too and that advantage would not be an advantage anymore. I am not a day trader, but I do like to try to get a few more dollars by guessing the move on the day I want to open or close a trade. I always try to get some, all or even more than the spread when I place trades.
The first hour every morning is called the amateur hour. I have heard many people say you should not trade during this time. I have to believe there is a context to that suggestion because I have found it quite useful. The market can make big moves in the first hour of the day. If I have a profit target for a trade that hits during the first hour of trading, I am happy to close the trade. If I have a trade I want to place, and the open gives me a better fill than I was looking for, I’ll take it.
I’ve seen the market open low and go up, and I’ve seen it open high and go low. I typically build a position over time anyway so getting filled at the open is fine with me. I’ll put on a portion of my position at the open and then place the same order but with a better fill. If I get filled, great, if not there is always another day. No market goes straight up or down.
My trades are typically longer term trades. The shortest can work if it takes three weeks to make a profit I am looking for. The longest has been 11 months. The long term ones can get the same fill for a week. The short ones have pretty explosive profits. I am not able to perfectly time the market so if I get the fill I want; I really don’t care what time of the day it is.
One thing I think my study of the market’s movement has done for me is to make me comfortable with waiting for a trade. I do not judge the day based on pre-market or even the open. A huge move during the day can be erased that same day.
So if the market open gives you the trade you want, take it, that is if you trade like I do.
Enjoy,
Ken Bailey
OptionsANIMAL Instructor
