First half hour rule

[stoploss please]

I have always been told that I should always avoid the first half an hour when the market opens because I run the risk of getting caught out in a fading market.

I always stick to this rule however I find some of the best action happens in this time slot.

What should I do?????????

 

[rudolf]

Hi stoploss,

On balance, I think you should stick to your guns and avoid beating yourself up over lost opportunities ........ in hindsight, it will often seem like you've missed out ........ "a wonderful thing" as they say

Many well-respected taders promote the 1/2 hour rule, based on their observations over many years. Re: the Dow, I believe that trading in the 30 stocks is phased in over the initial 1/2 hour and this makes for choppy trading ("Mother Goose hates Microsoft" is pretty unpleasant when you're long ).

On the flipside, some traders look for the breaching of levels from the open (depending on EOD analysis) and are prepared to risk the first 1/2 hour if there's an incisive move through the level. From personal experience, timing isn't that straight forward, especially re: SB vs. market pricing so I'd say the risk is higher than post 3 pm (again for the Dow).

Asking this question, your appetite for risk doesn't seem great so that's why I feel you should carry on as you are + develop your trading skills during normal trading hours.

Good luck if you go for it though.

Rudi

PS occasionally get significant economic news at 0930, 0945, 1000 US time / EST which can also reverse the Dow + global indices.

 

[oatman]

I leave the first 20 mins alone. If you don't want to, then trade it. :cheesy:
It's your decision and you'll soon decide if you like it or not. As always it's swings and roundabouts. What's good for now might do you damage in increased volatility.

 

[stoploss please]

Cheers Rudi

I am going to stick to my rules.

 

[Skimbleshanks]

The first half hour of the US markets are great for trading, but only if you know what you're doing, and are quick on the buttons! They are lethal otherwise. So practice and practice before you dip your toe in the water.

Some days are much easier to trade than others - have a look at the overnight trading to see if there are any clues as to overnight support and resistance.

From having traded the opening bar, my observation is that the market often (but not always, of course) changes direction on the third 5 minute bar. So if I enter on the first bar, I would be looking to take my profit on the second or third bar, and anticipate a possible change in direction.

Trading the opening is often just a continuation of the previous day's activity (ignoring the overnight stuff). So if the previous day had one big drop during the late afternoon, then you would expect to see some consolidation (triangle, flag, etc) at the opening. This is just basic TA knowledge of Elliott Wave formations in trends, and pullbacks. If the previous day had a wave 1, wave 2, then a wave 3, you would obviously expect the day to open with a choppy wave 4 - great to avoid, unless you know what you're doing.

The overnight trading will tell you if there is going to be a gap formed at the open. You probably have your own gap strategies, but on such days I would take my profit on the first and second bars, and be ready for the turn on the third. If it doesn't turn properly on the third (ie not a trend reversal, but just a little pullback), then the market is often already in its trend for the first hour or two of the day.

 

[SUNSEEKER]

Skimbleshanks,

great reply, the 30 minutes are crucial in my opinion... I have gone through 7 years of intra-day data. My experience tells me that you will rarely see a trend reversal once the direction after the initial 20-40 min extreme is done. This takes a little more explaining. I have done a synopsis on this, but I think it is on my labtop at home...I will post on this when I can retrive document

Sun

 

[mmillar]

stoploss,

You might also want to refer to Naz's posts on trading the open...

http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=4523&perpage=30&pagenumber=3

 

[sidinuk]

I tend to trade a break of the first 15 mins hi/lo. As Sun says the market can take 20-40 mins to establish the trend for the day, so the first trade can be a very short one for a small loss! However if the market does reverse then so do I and hopefully catch the real day's trend much earlier. Providing your stops are reasonably tight then the points won from catching a trend early will outweigh the losers, which is always a good idea in my book!

 

[stoploss please]

Thanks to everyone for this information. What has been said confirms to me that trading the first half an hour is not a game for the novice trader.

If I can expand on this subject, how many people are active in trading 11.15 EST to 2.15 EST. According to a few guys I speak to out in the US, they just turn their pc off during this time as the market lacks direction because all the main players have their heads stuck in the old nose bag.

 

[Skimbleshanks]

I trade between those hours - not every day, but most days. If the morning has been consolidation primarily, then the best trend runs of the day happen during the lunch period!

It's often easier trading over US lunch because the big boys are not jerking the market around too much, so it's often nice and smooth swings.

And conversely, if there has been a powerful trend move in the morning, then the lunchtime trading will be a waste of time because the market will often be in a tight range.

So I use the morning session to know whether to stay away, or hang around for some extra fun.

 

[mmillar]

I only initiate new trades from 9.50am EST to 11.30am EST. Obviously if a position is good I will still run with it later in the day.

 

[stoploss please]

Skimbleshanks

So this morning, we have had a move to the upside followed by a 10am EST reversal and then followed by a tight consolidation for the past couple of hours.

The trend since the 17/06 has been down so therefore we should not be surprised if a break beneath 9070 leads to a continuation of the current trend.

I am a novice, does my analysis make sense or am I talking out of my bottom.

Cheers
Andy

 

[Skimbleshanks]

I trade just intraday (well I take the occasional longer term punt, but for pennies) so I really only use just the previous two days. Anything longer than that is not appropriate, in my view, to take into account for intraday trading.

 

[mercury7]

Congrats sidinuk, your break at trading the previous high after 15 minutes worked precisely today!
In fact it was almost to the second,passing high of 9123,whipped up fairly quickly to a profit of cerca +30 points including spread, is it always that easy for you?
Kevin

 

[sidinuk]

thanks Mercury7 glad it worked for you today. I wish it was always that easy!

I looked at about 16 months worth of intraday day for the E-mini S&P500 (the dow and the S&P trade very similarly so it should work on either) to come up with an optimal time to use for the breakout.

It certainly doesn't always work as neatly as today but providing you keep a reasonable stop you should make more from catching a trend early than you lose on the times it doesn't work. I found that quite often waiting 'till 10am can cost far more in lost points then just taking the early punt at 9.45. Like today, the move was all but over by 10am!

All of the dow stocks are usually open by 9.45 so you should avoid most of the shenanigans.