The midday hesitation game
“How do you trade the midday markets” is a simple question for technical traders who focus on the price at the close of the market to make decisions.
This is a completely different story for traders looking for opportunities throughout the entire trading session. The desire of such traders to be always in the market during this period can ruin a completely prosperous day.
I know a person from Australia who made 1 OOO USD OOO not so long ago by scalping the local futures market. A trader friend of mine created an excellent trading strategy in order to work at dangerous times between the 1st and the last hours of the trading day. He bought a house by the ocean, and as soon as the Australian stock exchange hits a wave of bad mood, he goes surfing.
This decision is not something new for most of us, so we have to approach the question from the other side, is it good or bad, I am not leaving the work screen at this time. Because events can turn in unexpected ways. I am also a die-hard day trader who loves the volatile intraday swing that leads to profit at midday. Although retail trading activity dominates the 1st hour of business the rest of the day for the pros.
The opening of the exchange gives us an uptrend or sideways movement that can persist until the end of the trading day. Our first priority when the band calms down is to quickly assess the bulls and bears leadership in the 1st hour range. I achieve this with Nasdaq 1OO (NDX) and S&P 5OO, but SPDR Trust (SPY) and PowerShares QQQ Trust (QQQQ) can be used as an option.
In the first hour, highs and lows give short-term support and resistance levels, which are watched by market pros to take the initial signal to enter and exit. These levels can break at the beginning of the day or persist until the end of the trading session.
Then we set these levels on a longer timeframe, without good analysis it is impossible to say where and when there will be good buy or sell signals. Take a closer look at the lines that I have marked, as well as Bollinger Bands 2O and Stochastic 5,3,3. These three elements will provide a blueprint for the entire trading session.
Figure, click to enlarge
Almost all stocks will follow the fluctuations in the futures markets, so now you have everything you need to analyze the action of the market between 01:30 and 15:00 noon ET. For more time, you will be tracking 6O-9O minute fluctuations, which show leadership between buyers and sellers.
Combine your trades with the stochastic wave pattern, this will allow you to avoid losses. Many stock market speculators watch for market fluctuations looking for quick buy or sell signals, and computer technology allows a natural flow to execute large volumes of short-term strategies.
Swing also helps traders enter or exit with less risk on large-scale patterns. Consider Immersion (IMMR), which broke through 7-week support on Friday (Jan 4) and fell hard. Note that each trough this week (Jan 7-9) corresponds to troughs in the S&P 5OO.
This is not a curated example, but rather a clear statement of how the midday markets worked in 2008. Thus, I recommend that you put these indicators on your trading screens and start using them, or find another way to keep yourself occupied when the market is in a bad mood.
In practice, this alignment process always works, for example, there are trend days when they will ignore fluctuations entirely, for this reason traders should be aware of developing trends as they develop. Such sessions appear only 2-4 days a month. Look for at least one short-term trend swing during midday. Look after strong swings the trend is down, so speculators get bored and don’t see a good entry. This is why we see a break during heavy traffic and at the end of the day.
In fact, after the midday shake-up, if you bought or sold at a bargain price, it’s hard to rely on a rescue at the end of the day. The basic science behind placing your stop orders correctly will ensure that you feel relaxed. On the other hand, traders can find another excellent trade when counter-trends grab the tape at noon. This is how it works. Consider early price swings when looking for important support and resistance levels. Then place orders outside these levels and stop orders that will be triggered if the price breaks out opposite boundaries.
You will be surprised when the price touches these levels and moves in the direction you want. That will allow you to trade at a leisurely pace.