When to Trade What, Part 1 of 3

[PristineTrading 10]

Good Morning All:

 

If the title sounds a little confusing, it was meant to. The issue to be discussed today is not just 'when' to trade. There are trades that can be done any time the market is trading. That does not mean that you should be trading all day long, it just means that the times you pick to trade can be any time, IF you know what to trade. These next three articles will discuss this issue, and are geared toward the 'intraday trader', not the swing trader.

 

When to Trade What, Part 1 of 3

 

The comment above said that trades can be done any time of the day, does that mean even lunch? Yes. While it is often much discussed 'not' to trade lunch, part of that statement is left off. Do not trade lunch, unless you know how to trade it. Lunch is the time when many traders get into trouble, because they do not realize that many things will not act the same during lunch as they do during 'non-lunch' times.

 

The first issue to consider is the volatility and target expectations. If you could give a 'volatility rating' to the market, or stocks in general, it would look like this. If things move '1' during lunch, they move '3' between 2:15 and close, and move '5' between open and noon. If you do not realize this, targets will be unrealistic and lead to frustration.

 

Before Open: So how do you focus your time? For many people, the time spent between 8:30 and 9:30 may be the most productive (all times are Eastern, New York, market time). Preparing your watchlist, forming a gap list, and starting a market bias can be key to how your day goes.

 

 

Get ready for the open by picking the best of your favorite stocks, the best of your daily watchlist, and the best of your gapping stocks and know how you will play them, if at all, before the market opens.

 

The First Five and Thirty Minutes: Very few traders realize the power of reversal times, or the power of having the knowledge of how to trade each part of the day. Most traders, who play trends and breakouts, should not even be playing the first thirty minutes of the day. Look at your records. The chances are that you have a very low batting average for trades taken during the first thirty minutes. The only trades that should be taken during the first thirty minutes are based on gaps or other very special strategies. The 9:35 reversal time is one of the most reliable, yet few traders realize its power. Many get stopped out of plays, rather than profiting from, the 9:35 reversal.

 

 

The above chart shows an example of a price pattern that gapped bearishly, sold off hard for less than two minutes, and turned around so quickly, most traders who mistakenly tried to short the move down suffered losses. Knowing that this flurry move down offers a buying opportunity on a regular basis when played on the right stock can turn potential losers into big winners.

 

Once the five-minute reversals are over, many stocks have solid moves into the 10:00 reversal time. This reversal time can run anywhere from 9:50 - 10:10, but the power move usually comes closer to 10:10. Trends between 9:35 and 10:00 are usually very reliable, if backed by a strategy. However, 10:00 or 10:30 are the reversal times that often set highs or lows for the day. Stocks that do not reverse at these key times may go on to be 'power trends'.

 

Paul Lange

Vice President of Services

Pristine Capital Holdings, Inc.

[TheRumpledOne 14]

I remember back in the "good old days", TASR would reverse at 9:37 AM EST. You could practically set your watch by this move.

 

Most books and experts warn you not to trade the open. To me, the open is the only time to trade stocks. The Buy Zone / MILK THE COWS method takes advantage of the open price and the movement that follows.

 

When to trade is important, but finding the instruments that work best with the method you are using to trade is critical. Running frequency distributions that show how far price moves from the open tells you which instruments to trade and which to avoid. Simple, yet elegant.

 

Looking forward to part 2.

 

Thanks.

[Rashedbgd 10]

Nice tips, but why are we imphasing timing rather than indicators? Whatever the timing is, we need to watch our TS and indicators carefully for our trading.....isn't it?

[SpideySense 10]

Ahh the joy of indicators.

 

If anyone is looking for another hobby while waiting to trade - try a programming course at edX or Coursera. Free and a lot more productive than indicators vs timing.

[DbPhoenix 42]

Nice tips, but why are we imphasing timing rather than indicators? Whatever the timing is, we need to watch our TS and indicators carefully for our trading.....isn't it?

 

As regards indicators, only if the trader has little to no understanding of buyers and sellers and how their interactions move price. If instead he understands that price movement is governed entirely by demand and supply, he will also understand that indicators are not only irrelevant but that he will also always be late if he relies on them.

[doubletop11 10]

As regards indicators, only if the trader has little to no understanding of buyers and sellers and how their interactions move price. If instead he understands that price movement is governed entirely by demand and supply, he will also understand that indicators are not only irrelevant but that he will also always be late if he relies on them.

 

I agree with you DbPhoenix. And I would like to also point out that that watching your time of day with supply and demand zones is very important too. Using supply and demand zones with price action confirmation and time confluence is so amazing!

 

[Ticky 10]

Thank you very much for this eye-opening thread! I just got started with trading stocks and stumbled on to this forum; reading this made me sign up to interact.

 

I have a question, which may be completely obvious, or completely unanswerable.

 

Trends between 9:35 and 10:00 are usually very reliable, if backed by a strategy. However, 10:00 or 10:30 are the reversal times that often set highs or lows for the day.

 

Do you have a reason as to why this tends to be the case? Does it come down to human pattern, or what?

 

I also have a more general question, and perhaps this is not the correct thread to be asking in, but here goes anyways:

 

If instead he understands that price movement is governed entirely by demand and supply, he will also understand that indicators are not only irrelevant but that he will also always be late if he relies on them.

 

I think this is the most basic part of stock trading that is also the most mind-boggling to me. I spend days sitting here, watching the charts move up and down, treating it as some magical, almost random entity. How exactly does supply and demand come into play here? If this warrants its own thread, I would be glad to start one.

[DbPhoenix 42]

 

As regards indicators, only if the trader has little to no understanding of buyers and sellers and how their interactions move price. If instead he understands that price movement is governed entirely by demand and supply, he will also understand that indicators are not only irrelevant but that he will also always be late if he relies on them.

 

I think this is the most basic part of stock trading that is also the most mind-boggling to me. I spend days sitting here, watching the charts move up and down, treating it as some magical, almost random entity. How exactly does supply and demand come into play here? If this warrants its own thread, I would be glad to start one.

 

Not just its own thread but its own forum. Click here if you're interested, though you may find out far more than you really want to know.

[ASWATHY 10]

Hi there, is this reversal time concept applicable to commodity market also?

 

 

 

Good Morning All:

 

If the title sounds a little confusing, it was meant to. The issue to be discussed today is not just 'when' to trade. There are trades that can be done any time the market is trading. That does not mean that you should be trading all day long, it just means that the times you pick to trade can be any time, IF you know what to trade. These next three articles will discuss this issue, and are geared toward the 'intraday trader', not the swing trader.

 

When to Trade What, Part 1 of 3

 

The comment above said that trades can be done any time of the day, does that mean even lunch? Yes. While it is often much discussed 'not' to trade lunch, part of that statement is left off. Do not trade lunch, unless you know how to trade it. Lunch is the time when many traders get into trouble, because they do not realize that many things will not act the same during lunch as they do during 'non-lunch' times.

 

The first issue to consider is the volatility and target expectations. If you could give a 'volatility rating' to the market, or stocks in general, it would look like this. If things move '1' during lunch, they move '3' between 2:15 and close, and move '5' between open and noon. If you do not realize this, targets will be unrealistic and lead to frustration.

 

Before Open: So how do you focus your time? For many people, the time spent between 8:30 and 9:30 may be the most productive (all times are Eastern, New York, market time). Preparing your watchlist, forming a gap list, and starting a market bias can be key to how your day goes.

 

 

Get ready for the open by picking the best of your favorite stocks, the best of your daily watchlist, and the best of your gapping stocks and know how you will play them, if at all, before the market opens.

 

The First Five and Thirty Minutes: Very few traders realize the power of reversal times, or the power of having the knowledge of how to trade each part of the day. Most traders, who play trends and breakouts, should not even be playing the first thirty minutes of the day. Look at your records. The chances are that you have a very low batting average for trades taken during the first thirty minutes. The only trades that should be taken during the first thirty minutes are based on gaps or other very special strategies. The 9:35 reversal time is one of the most reliable, yet few traders realize its power. Many get stopped out of plays, rather than profiting from, the 9:35 reversal.

 

 

The above chart shows an example of a price pattern that gapped bearishly, sold off hard for less than two minutes, and turned around so quickly, most traders who mistakenly tried to short the move down suffered losses. Knowing that this flurry move down offers a buying opportunity on a regular basis when played on the right stock can turn potential losers into big winners.

 

Once the five-minute reversals are over, many stocks have solid moves into the 10:00 reversal time. This reversal time can run anywhere from 9:50 - 10:10, but the power move usually comes closer to 10:10. Trends between 9:35 and 10:00 are usually very reliable, if backed by a strategy. However, 10:00 or 10:30 are the reversal times that often set highs or lows for the day. Stocks that do not reverse at these key times may go on to be 'power trends'.

 

Paul Lange

Vice President of Services

Pristine Capital Holdings, Inc.

[dbelov275 11]

Thank God i came across this article. Thank you so much for such an enlightening. I will share this to my friends. they will love it.