Active Trading

Becoming a savvy trader is a constant learning process. So many things affect the markets in very drastic ways. Humans are fearful animals and it doesnt take much to spook us especially when it comes to money. Learning to set aside your emotions so that you can think clearly when trading stocks is very essential to success as an active trader. The consistently most volatile time of the trading day is the first hour of trading, Stocks tend to what we call gap up prior to the open and with the flurry of everybody trying to get in, it is the most emotional time. I like to wait till a stock has settled down AFTER the first hour. Lets say for instance the prior day a stock closed at $1.00. During the overnight the company may have released news or earnings reports that spur traders to place orders prior to the open. Early premarket traders also place orders which can be higher than the stock closed at the end of the prior day. when the market opens lets say the stock opens at $1.25 per share. Thats a huge 25% gap up that once the market opens will cause a strong demand for the stock causing it to go up even higher until,those guys who bought in early or placed early orders at say $1.00 decide to take profits or sell entirely causing the price to come down sometimes even lower than the stock closed the day before. This is what we call filling the gap. Alot of times all of this activity happens quickly in say 10 or 15 minutes and lasts about that first hour. Alot of money is lost getting in too early. I wait until i see the gap down and catch the price on the way back up. Sometimes it is very difficult to wait but ill tell you its much more satisfying when on occasion the stock doesnt come back up and I still have all of my money. I also like to be out of a stock before the last hour of the day, unless Im holding my position long term. The same flurry that happens at the open alot of times also happens at the close as traders look to get out or those who missed the boat earlier try to get in so as to have a position for the next day. I rarely hold a stock longer than 2 to 3 days as i like to stay aggressive as a trader. This is why it is so so important to papertrade first and find out what kind of trader you are and to also continue to hone your trading skills. tommorrow I will talk more about paper trading and honing those skills. Until then..........