Spend Two Hours a Day Creating a Trading Plan
Every good investor knows that to make money from any investment, you must first understand all the aspects, so let’s see why most trading volumes are concentrated at the start and end of the day.
If you use your curfew to examine stocks for making a trading order for the next day, you and others like you have trading grounds in the first hour volume. As soon as the stock market opens, the swift commercial trade enters the market and quickly fills up.
Along with executed trades for retail investors, most of the volume comes from mutual funds, hedge funds and high volume traders. Another source is the day trader who must set their position in the first hour. All these factors are added together representing a large number of volumes in a short period of time.
But what about the afternoon?
The general rule among day traders is always to end their day without having a stock position, so they have to sell their position at the end of the day. In addition, retail investors, who try to avoid daily trading rules, can buy stocks by the end of the day so they are free to sell them the next day if they so wish. Some institutions often do not want to hold big positions during weekends or long holidays when they have no means to liquidate if there is a major news release going on somewhere in the world.
So how can you benefit from this phenomenon or at least avoid losses?
The answer, examine the volume.
When you are researching stocks, look at the amount of volatility in the first and last trading hours. If it tends to be very unstable during these hours, you may be able to buy or sell for a price much higher or lower than its base value. Set your order limit to unusually high or low to see if you can get a good deal in the early minutes of trading.
Secondly, trading today for tomorrow
Retail investors can not buy and sell shares on the same day more than three times in five business days. This is known as the day trader rule pattern. Investors can avoid this rule by buying at the end of the day and selling the next day. Using this method, a person can hold shares for less than 24 hours while avoiding day trader rules. Realize that short-term trading strategies come with a lot of risk, careful research and risk management are essential.