In this video we discuss day trading the open. Not the opening range but the open itself. Not the first 90 minutes but the first few minutes. In some cases, taking trades within the first couple of minutes of the market opening. As with any trading opportunity, there’s more than one way to approach it in terms of trade management and we’ll discuss that too. But the opportunity itself is often available within seconds of the open.
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This day trading opportunity is one that you will be able to see quite clearly for yourself, if you take time over the coming weeks to watch for the things we will discuss.
Now of course, this flies in the face of a lot of conventional trading wisdom that specifically tells us to avoid trading at this time. Many people wait for the first 15 minutes to pass to let the market “show its hand” before they consider placing a day trade.
The reasons usually given for not trading the opening minutes are
1. It is too volatile, and it certainly is volatile, it’s going to swing one way and then the other very quickly. But that doesn’t mean it’s too volatile. It just means it is volatile.
2. That there is no high or low range for the day yet, and the previous days range extremes may be far off too, so there’s no ‘reference points’ to play off.
3. For index futures, institutional equity trading is just starting and the stocks and futures need to “realign”. That arbitrage trading needs to bring everything into balance. On days when the ES opens 50 points down that’s a valid point but most of the time it will not effect this setup.
4. In fact, one article out there says that trading in the first 5 minutes is nothing but gambling.
There’s a lot of other reasons out there too. The advice to not trade those first minutes isn’t really terrible advice. It’s just really generic advice. Many traders wait for the opening range to form and play off that. The opening range is the first 30 minutes of trade and a lot of traders will use that as a reference point – playing breakouts or reversals. There’s nothing wrong with that at all but one thing is certain, you will be trading an area where a lot of other traders are looking to get positioned. It’s a common area to play off and that means there will be more predatory traders looking to get take advantage of the additional stops often built around that area.
The big issue with the “don’t trade the open” though is that it’s a wide sweeping statement that appears to apply to all markets and every day. As if it’s written in law or something. Yet as we will see, opportunity is there.
Not all futures market opens are equal. Why would they be? Not all markets open in the same way. Why would they?
We show you something that occurs on more days than it doesn’t on the markets I trade. It’s something you can observe yourself and I would encourage you to do that over the coming weeks before deciding if and how you would like to trade it. This is a fairly simple setup but that doesn’t mean it’s easy to trade. It takes some experience of observing the opens to get to grips with the process of trading it.