Day Trading – Quick Trades In The Early Hours
August 23, 2018
If you have been following some stock analysts on Tv, then he would be recommending many stocks to you that you should try to trade in as soon as the market opens. So when you hear the opening bell you try to punch in your trades, only to see that the price that you had entered never gets filled and before you could make the changes to the price in the order window, the trade has already reached the target price.
Early morning gaps
When you are a day trader you could take good advantage of the early morning volatility that happens as soon as the market opens. These trades are quick and let you profit from them within seconds. In most cases, the trades do not even last for a minute.
How to prepare yourself
Your index is traded globally too and this would give you a rough idea about how the premarket opening should be. When the pre-market session ends you get to know the price at which the individual stocks would open it.
You can makes good use of the opening price.
After the market closes on the previous day, go through the intraday chart of each of the stocks that you have in your scanner. Keep it limited to some of the blue-chip stocks that you normally trade in. Mark the levels on the intraday chart where you would want to go long or short on the trade.
Do your homework
You first need to select the daily chart as the higher time frame chart and then analyze the intraday day charts accordingly. You may notice at times that some of the stocks have closed closer to a good demand or supply level. The next day when the market opens you may notice that the price of the stock gaps to those levels and trades as expected.
So if you have the levels marked already, you can look at the premarket closing price and take the trade as soon as the market opens. This works wonderfully and you are out of the trade within seconds. However, take care to understand that this method is recommended for those who have some experience in trading. These trades are pretty quick and thus you should be confident to act fast.
A word of caution
Even if you are 100% sure that the trade will work out, you still need to have a stop loss in place. This means that you need to make changes to your exit prices immediately if need be. You should be very comfortable using the trading platform. The market is so volatile in the morning that a slight delay could make you lose a lot of money.
Another thing to remember is that this trading strategy will work well, but not on all the days. Make sure that you are aware of any event that is scheduled for the day. Also be aware if there was some major news last evening that could affect the market. If this is the case then the market could be very unpredictable and thus it is best that you stay away from trading this strategy for that particular day.