1st Hour Trading

Discussion in 'Trading' started by jones247, Feb 22, 2008.

  1. I created this thread on the Strategy Trading sub-forum; however, I received no responses. Hopefully, others more familar with this topic and more willing to share their views will occur in this forum.

    Nonetheless the issue is as follows:

    Does anyone have extensive experience (or any experience for that matter) with a technique of trading only within the first hour after the equity market opens? I understand that such a strategy can be applied to the stock or futures market. I believe that Don Bright promotes a similar strategy for his prop firm. I've come across other market advisory firms that tout this strategy as well. Statistics have proven that the daily high or low is established within the first hour of trading on more than 70% of the time.

    The biggest challenge to me would be to determine the direction of the market during this time period. I wonder if anyone has studied the correlation between the futures market and/or the pre-market direction with the indices to determine the potential direction within the first hour. Perhaps indicators, such as ADX or Stocastics, would better serve to determine the direction within the first hour.

    If you have any valuable insight or experience with such a strategy, perhaps we can build upon it in this thread.

  2. maxpi


    The Brights traders make good money with open range breakout trades. I'm trading the YM from home and learning to segment the day, markets trade differently as the day progresses.....
  3. da-net


  4. clooch


    My entire trading strategy was based on the 1st hour of the day. There is no need to determine which direction the market is going. Of course u will have a bias, however, ignoring that bias and just taking your signals with no bias is your best move. The most activity in the day happens in 1st hour and most profitable floortraders use these orders for short term profits. By the 2nd hour the pits will begin to clearout and the movers are not there unless to return for a report of some sort and the closing hour. The rest of the day orders are being filled by the big boys. I trade the 30yr US and SP primarily 1st hours only with higher volume and shorter moves.
  5. Thanks guys for the invaluable references. Interstingly, many "gurus" will advise against trading during the 1st hour due to abnormal volatility, which causes wild whipsaw swings. Others contend that the 1st few mintues or the first 30 minutes or the first hour determines the direction for the day in most instances.

    My question is... have you noticed a correlation between the early futures indice prices and the trend of the equity market within the first hour after opening. In other words, if the futures market from 9:00 - 9:30 AM EST is trending upward, what are the odds that the eqity market between 9:30 - 10:30 AM EST will also trend upward?

    Perhaps it's best to create a futures spread with a 1% stop loss and a 2% profit threshold. For example, long-ES for March and short-ES for April at 9:45 AM EST. Thereafter, set to exit the first position that experiences a 1% draw down (about 13 points) while planning on booking a profit on the leg that increases by 2%. I know that I would be at the risk of a whipsaw. This is why I'm considering entering at 9:45 AM EST.

    Your thoughts...


  6. Walt

    That time is a very scary time to enter, what are you using for indicators

    And do you have a pre-market plan

  7. Price action and news fundamentals would be my primary tools. In addition, I would monitor the relative volume during the opening hour of the market.

  8. i always have said the biggest moves are always made near the open. why? thats where all the emotional buying takes place.the adrenalin is flowing at 9:39.
  9. The issue is that is just before a reversal time, I sugest
    you try to use a 5 min avg. price meaning the avg till 9:35, bull above, bear below
    then use the 15 min close as a pivot line put stop below 5 min avg. for longs and above for shorts

    What do you use for charting? ( I use Tradestation)
    #10     Feb 22, 2008