Trading in the initial stage of session differs from the next its hours. It is not subject to doubt. Unfortunately, for persons who just learn trading, the game on opening may constitute too big risk. It is worthwhile to remember it.
Peculiarly it is directed to persons, who only begin and as soon as possible would like to be on the market and to feel how it is to have an open position 🙂
Trading at market open
It wasn’t differently in my case 🙂 I remember that in 3 first months when I was totally focused on daytrading on American shares as I had 10 sessions practically in a row when right after opening I crossed the stop loss established by trading office.
I stubbornly believed in the strategy developed by me then. However, I overlooked completely so-called timing. That is a moment in which the effectiveness of opening position would be greater.
Only after series of losses on opening I started to wonder what is wrong. There were a few components, which according to me didn’t lose timeliness and concern group of people who just start trading. Therefore, below I want to warn against a few facts, which differ trading in the initial phase of session in relation to consecutive hours.
Remember that what I mention below is a punch line of my answers to questions, which place new traders joining to the proptrading group of RemoteDayTrader.pl – as remote traders. I know what mistakes I made, and I can see what mistakes over the years commit persons aspiring to become traders. These mistakes are usually very similar and concern:
desire of fast gaining the position
desire of fast profit-taking
become rich in the shortest time
And it causes that they open positions without previous preparation, tested strategy.
#1 Volatility at open
Changeability at opening, and maybe differently – length of candles on companies, much differs from the average changeability on the given company. Therefore, if you are a beginner trader, I recommend you to skip the first 15 minutes and to observe. Only when you realize what may happen at the opening, you will prepare proper management of the position –> then start trading also in these minutes.
I assume that it is better to learn the strategy from lower changeability than larger. Even if want to play on breaking through. Ok, no problem – but test it first on companies with smaller daily reach. If you have results, you are able to manage the position appropriately (I mean the fact that emotions which will appear while having a position won’t influence your decisions), only then play on companies characterized by a greater changeability.
#2 Spread at open
Particularly on more expensive companies, the spread in first minutes is very great. Below in recording I present an example of the company at opening and spread which characterized it and after 15-30 first minutes. You most probably will agree with me that the company looks quite different.
Of course, I admit that spread carries an increased risk, but also the potential of profits. It is a fact. However, for the beginner trader this quite often constitutes an additional risk, which usually ends with a loss.
#3 Volume at open
The best represents it any of below graphs. Most probably you already noticed that the initial phase always carries increased volume, repeatedly deviated from successive periods in the same part of session.
Volume is an excellent indicator of the fact that something is happening on the company. However, for the beginner trader this may be overwhelming and will cause a fast closing of the position – whether with small profit or loss.
Analyze and elaborate
For me in the first 3 months a turning point was when I started to better manage moments of entry into positions. When as the novice self-taught daytrader, I realized that it isn’t necessary to open the positions as soon as possible, but it is worthwhile to waiting out. It is a good learning of patience and lesson which enables to elaborate own strategy.
This taught me that if I have good strategy, but despite everything they generate losses – sometimes a small change may significantly affect the results. This way it was in my case – change in just a few minutes of the moment to enter the positions than previously planned, changed results very quickly.
Because I realizes how it is in trading: you open the positions, you cut out with stop loss, and after a few minutes you would already earn on the same position. And complaining appears 😉 It is worthwhile in such a moment, if the given situation repeats, to think what affected it and to elaborate own assumptions.
A few words at the end
Remember to have long-term goals in trading – “Trading is a marathon, not a sprint”. In my opinion more important than fast, sudden, sometimes incidental gains, is to have a strategy that allows you to earn regularly and steadily. You want to be a momentary star on the market, or to make trading your profession?
What was your start? Whether you at once attacked deep water and trade in the first session minutes? If yes, with what effects? Share your experience below in the comment.