The market open is often one of the best times to make a trade because the open often offers some great moves due to the fact that the market is normally very emotional at the open, so this increases both volume and volatility, which is what is needed to move the market quickly and consistently in any one direction for an extended period of time. Now the question that I’m often asked about the market open is this: Is it true that using price action helps you determine entry direction during the market open? If so, how do I use price action and is there any other way to help determine entry direction during the market open?
There are many different entry techniques that are designed to take advantage of the open, and most are nothing more than gambling in our personal opinion. You only want to enter the market when the odds are in your favor, otherwise, you might as well just flip a coin and enter that way, because it’s likely to produce similar results to most common entry techniques that you will find across the Internet in chat rooms and on chat boards that are trading related. Any time someone offers you free trading advice or shares with you a trading technique, it would be very wise of you to trade this technique for an extended period of time on the simulator before risking one penny of your trading capital.
I see people go from one idea of the next, day after day, week after week, continuously looking for the next great trading idea that is going to make them rich. On most occasions, these traders never try anything for very long, because most of the time, the idea fails and they give up on it and simply move on to the next idea that is sure to be the holy grail of trading techniques. What is really sad is that these traders experiment with these trade ideas using real trading capital.
In the end, the only way to make money consistently as a trader is to learn to read a price chart. Once you have that skill, you will understand why prices are doing what they are doing and you will better understand where prices are most likely go go next in the short term. Call this whatever you like, but if you understand price action and how to read a price chart, you are miles ahead of most traders. If you use price action trading techniques to trade your market of choice, you will be prepared at the open for what is likely to occur and you can trade accordingly, so yes, using price action does help you at the market open.
Below is an example of an article that we ran across recently at www.guerillastocktrading.com. I am including a small excerpt from this article, and here’s what it had to say.
A professional trader made over $100 million using this market open strategy and now he’s going to give you this same secret for nothing!
Guerilla Stock Trading is deliberately out to show up every other big stock trading message forum and blog by giving away this monster of a secret!
Everyday professional traders make millions of dollars from amateur traders at market open and now I am going to show you how to do it.
Rumor is that the famous trader Steven Cohen made over $100 million dollars using this hit and run strategy against amateur traders.
Let’s review some basic definitions before getting to the strategy.
What is a trade? A trade is a bet on a price change.
Why do prices go up? The old-school of thought said that there’s only one thing that makes a stock go up, more buyers than sellers; the only thing that will make a stock go down is more sellers than buyers.
This is not true. In fact, this logic is so stupid it doesn’t even make any sense. Think about it. For every trade there has to be a buyer and a seller. The market goes up when buyers have more money and are more enthusiastic than sellers.
Markets are made up of a huge crowd of people. There are three groups of people in the crowd: buyers, sellers, and undecided traders.
Buyers want to buy as cheaply as possible and bet that the stock is going to go higher so that they can sell to some other sucker at an over inflated price. Buyers hope that a greater fool than they will come along to buy the stock for even more than they originally did. You can read the rest of the original article here.
We did not share this article with you because we are suggesting that this strategy works and should be used in your trading. We simply chose it randomly to give you an example of the information that is out there about trading the opening of the market. We honestly have no real opinion on the overall strategy here, but we do agree with much of what they are saying about the opening range, but if you know how to read a price chart and you understand our price action trading techniques, then you won’t have to learn anything new about the open or any other time of the trading day. Price action is consistent and continual and works in any market and on any time frame, so you use it the same way almost every time without deviation! If you can truly learn to read the price action, you won’t have any doubts about what is going on with prices and you will have a much better understanding of where prices are headed next.
If you are interested in finding out more about how using price action helps you determine entry direction during the market open, or how price action trading help you improve your trading at any other time for that matter, you can get more information by visiting http://priceactiontradingsystem.com/pats-price-action-trading-manual/.