Have you ever thought about this? When is the BEST time of day to place a stock trade, or any trade for that matter. As I think back to the many times I have placed a trade, a good portion of them have been not too far from the open. But it also seems like most of the times I ended up regretting entering that trade by the close of the day because the candlestick changed to something more bearish.
So it seems like the BEST time to place any trade from now on is between 3pm to 4pm. In fact this may be such a powerful time to place a trade that maybe it should be the ONLY time to place a trade. Professionals tend to close the market. And maybe amateurs are the ones getting in at 9:30am.
But I also realize that sometimes a stock will gap up right in the AM and breakout over the range and then just keep going higher all day. In those cases you stand to miss out on all the daily gains and then are at risk of getting in right on a peak of short term strength. But on the other hand at least you have confirmation that the stock is strong and did not do an intra day reversal by end of day which can be costly in terms of commissions and risk management.
So it is definitely worth consider only place initial trades between 3 and 4 pm. This is the time where the market has matured throughout the day and where market must decide how to close. The close is the most important price to be aware of. it is what shapes the charts and determines to a large degree what the next day will hold.
For example today I wrote about the sp500 Rejecting the range under 1332. The sp500 closed above the range and rejected the lows. But it did so by the CLOSE of market. I think the trader who waited until 3pm to 4pm and preferably between 3:55pm and 3:59pm would be at a much greater advantage today.
The traders that became scared when the DJIA was down 80 points today ended up paying a commission and maybe a lost opportunity.
I do not recall ever reading any trading book or hearing any pro traders advice that ALL Trades should only be placed between 3:55Pm and 3:59Pm but I am starting to think this could help overall trade management and success over the longer term quite a bit…
if it was a brilliant idea to always trade the last 5 minutes of the day, i expect u mite have read about it. what evidence do you have to support your proposition?
i have found it common that between 3:55 and 3:575 the market may go strongly one way only to reverse course, just as strongly in the last 2.5 minutes – – for an overall net wash.
what evidence do you have for your theory or is it just a cockamammy “hunch”
I remember Alexander Elder wrote about the psychology of trading and pointed out that professionals typically close the market.
I have noticed this during the last hour. Volume tends to be the most robust in some cases and this can really swing price in the intended direction.
I dont have any hard evidence other than what I have seen in the markets.
I suppose context is everything and it depends on the setup.
But as I think back some many times that it was usually the last hour where I was able to say with the greatest confidence that X was the intended direction and that this is the right direction to trade in.
Making trades only in the last few minutes of the day is really only appropriate for swing trading or trade durations of at least a few days I would think.
In a lot of cases also the selling decision should maybe wait for the close as well. Just look at VG today or SLV a long time back when it had done a very steep drop intra-day only to reverse to close flat by the end of the day. If one sold middle of the day on fear, then a huge disadvantage to the other traders who wait for the close.
Perhaps I am mostly referring to trading price action that is in the ‘middle of a range’ and not trading action that is immediately violating important support or resistance zones.
Yes the last 2.5 minutes make sense in that you can have all the day traders taking profits right near the close.
Tom,
So what do you take into consideration to close/exist out of an option/stock position.
Well every trade has a certain target profit or percent expectation… maybe to be conservative take half of that expectation and then leave the trade.. or scale out of a position once it starts to get to 1/4 1/2 or more of your profit targets. The issues is though when starting with with ‘ground floor’ capital amounts scaling in and out is not so realistic because of commission penalties.
Interesting comment. I find that it is just too dangerous to trade in the first half hour that is for sure.
But you may be on to something, since my observation is that the algorithm boys are usually out of the market in the last fifteen minutes since they wont have enough time to reverse their mistakes if they should occur and for sure you are less likely to have the one hundredth of one cent trades in a blitzkrieg formation likely to move the market. Since the blitz players have gone home too!
I in other words in the last few minutes the real direction of the market is like to be observable. But then again that does take away a little of the fun, by limiting your timing to the last few minutes.
I have read an analysis of what happens at different times in a trading day. Such as the mutual funds usually taking their positions in the first 30 minutes and the QE2 banks around 10:30 NY time.
I think your suggestion is a good one.
Thanks