I'm interested in hearing the pros, cons, and various strategies involved with open trading vs. closing trading. It seems to me that most people focus on trading upon the market open. How many people actually ENTER positions at the close? It seems to me that there may be opportunities at the close because daytraders close their positions, which drives down prices. Also, since fewer people emphasize the close, there may be more opportunities there.
Closes can be great. Some days better than others. Just got to be ready to take the risk over night. But like trading the open, there is a learning curve.
Usually traders that take positions soon after the Open are day trading. Traders that take positions at the Close are swing trading. Thus, two different types of trading. Further, there are less opportunities in swing trading in comparison to day trading regardless to which is more profitable. Simply, a good swing trader should not be getting trade signals every trading day. In comparison, a day trader should in theory have a least one trade signal per trading day. Mark
if you are trading longer than an intraday position, the close is the most important (imo) price of the day. as well as the value area, price, imo spread traders, and longer term traders tend to want to do a fair amount of opening, unwinding, etc. of positions near the close, or even AT close (with a MOC) order
To trade the open, track the morning futures. Up or down? I seldom trade the open unless I know the stock very well (and these are very few). If the futures are up I have found the open to be a trap for those short to cover. If you bought long at the open you just got snookered. I've concluded the important time frame for the close is after 3:40 to buy. I have tracked various times and this is something I think should be part of a personal learning curve.
Can you explain why 3:40 is a good time to buy? Is it simply that many daytraders have closed their positions for the day, driving down prices? Or is this just something that you have observed?
Below is a Q & A quote from Bright Trading: I have read other similiar articles. How do you interpret the before-opening imbalances, as there is no share imbalance showing? How do I deal with a stock imbalance on the opening stock? If I see an opening imbalance, and it is the same number as the ask price, how should I interpret this? Thanks -- John You are seeing an opening indication, not imbalance (imbalances come out at 3:40 pm [ET], except for option expiration day, when we see the shares sizes pre-opening). The specialists are simply putting out an opening range estimate -- this is done when they think the stock may open 35 cents or so away from the previous day's close. The only day we have opening imbalances (shares) is expiration day. The rest of the time we have opening indications (price, not shares). Let me explain a bit further: The NYSE specialists receive many orders prior to the opening each day, both buys and sells, with limits or simple market orders. After reviewing these orders carefully, they project the approximate range for the opening price. If they anticipate a price more than 35 cents or so away from the previous day's close, they generally post the expected opening price range a few minutes before the opening. We should all be aware that morning indications are giving us price ranges. MOC (market on close) imbalances are giving us actual share sizes. At 3:40 pm the specialists review all their MOC orders, match up the buys and sells, and let us know how many extra shares are either bid for or offered for sale. This imbalance is updated once again at 3:50. In both situations, the specialist is basically looking for assistance in equalizing the shares to provide an overall better price for both sides of the trades.
I want to add one more thought. I traded on a simulator with some fellow IBD'ers. We could see each others trades. This one fellow had a phenominal number of winning trades, 95 % of his buys were after 3 pm, most before the close. Almost all of his sells were between 11 and 2 pm. I had tracked about 75 of his trades.