If you are a day trader who faces more setbacks than successes, then this might be the right time to change your strategy.
In the trading world, there are as many strategies as there are traders. Every trader, irrespective of their experience and track record, tries to deploy a strategy with the hope of making money. But how many do succeed is anybody’s guess.
If market trends are any indication, no more than 10% of people make profits on any trading day. Hence, if you want to be one among the chosen few, respect time and have a strategy that no one else can beat.
Market time and order timing are the most important things that determine the profitability of any trade. As a trader, you can be successful only when you know the rules that drive profits.
If you are a day trader, knowing the pattern day trader rule can set you off to a good start. You should also know what expert traders do to utilize the trading hours to its fullest.
This article will give you a snapshot of the things you should do before hitting the stock market with your hard-earned money. Let’s get started with the best ways to use the trading hours.
5 Things Expert Traders Do to Make the Best Out of the Trading Hours
Mastering the art of trading takes years for some traders, months for a few, and days for a handful. The faster you know the secrets of trading hours, the better will it be for you to be a successful trader.
1. Know the Trading Hours
Before devising a strategy to make the most out of trading hours, you should know how the market works.
The market hours are divided into the following three-time slots:
- Pre-Market Hours – Many stock exchanges allow pre-market stock trading to reduce volatility during the market opening. The pre-open market sets the course for the day. The pre-market is the best place for you if you are certain about the upward or downward movement of a stock.
- Market Hours – The market hour is when all traders jump into the scene and buy or sell stocks, thereby causing large price movements. Depending on the country and the stock exchange, the market hours can be anywhere between five and nine hours.
- After-Market Hours – A few stock exchanges allow after-market trading, but the timing varies greatly. Generally, most seasoned investors avoid after-market hours, as there is not enough liquidity.
As most of the action happens during the market hours, expert traders mostly trade only during the market hours. However, the pre-market and after-market sessions are places where you can find big institutional investors.
2. Decide When to Trade
Generally, the best time to trade for a seasoned investor is the first thirty minutes from market opening time and the last half an hour before market closing. Incidentally, these two periods are the most volatile.
However, if you are a newbie, avoiding the said periods might be a prudent decision. Once you get the heck of trading, you may trade the market opening and closing like a pro.
If you closely observe the market, you would find that stocks behave more rationally during the day and behave wildly during the opening and closing of the day’s session. Hence, choose the time slot that best fits your risk management strategy and profit-making abilities.
3. Ride the Trend
Stocks move in three directions – upward, downward, or sideways.
When a stock moves up, industry experts say that the stock is in an upward trend. The downward trend is when the stock prices move on the other side. However, for most of the day, you would find a stock moving sideways, which means there is no clear trend.
As a trader, your primary task is to identify the prevailing trend and ride it. You may also choose to go, contrarian, if you are cent percent sure that the stock has had its dream run, and will soon retrace back to a lower level. A contrarian trader goes short when everybody is going long, and vice versa.
Identifying trends requires an expert understanding of stock price movement, which includes knowledge of technical parameters like price action, indicators, and news. The earlier you spot the trend, the higher profits you can make.
4. Take Help From Expert Traders in Real-Time
Trading View is one of the best places to be if you want to take your trading skills to the next level. Other than real-time charts, the platform provides you with a way to interact with seasoned investors and traders.
However, you can extract the maximum benefits of Trading View only if you register with a broker who offers access to the Trading View charts. While everybody can use Trading View for stock-screening and charting, only those who have a trading account can trade directly from within the platform.
In trading, time is everything. With Trading View, you can not only get real-time data but also get signals from expert traders.
As you can place trades through your broker directly, getting help from an expert just at the right moment can turn your losses into profits. All of these can make your stock trading journey more exciting.
5. Choose the Right Time Frame
The time frame is to a trader what hard work is to success.
Every trader prefers a time frame that works best for them. In Trading View, for example, you can get time frames that start from as low as 1 second to as high as 1 month.
Traders who prefer to scalp usually choose smaller time frames from 1 second to 15 minutes. Positional traders prefer 1-hour to 1-day charts. Long-term traders generally go for day or month charts.
The time frame you choose can go a long way in determining your profit factor. Devise a strategy and test it on paper for at least one month before making real trades.
Also, Read: How Important Are Trade Show Exhibits?
The best way to use the trading hours profitably is by devising a strategy that works in all market conditions. While some traders choose a unidirectional approach, others work with a non-directional approach.
In unidirectional, you place a bet only when the market moves as per your wish, which can be either upward or downward. A non-directional strategy works irrespective of whether the market is going up or down.
As a trader, you should identify what time suits you the best. Once you figure that out, the rest of the things will automatically fall in place.