STOCK ANALYSIS

Does a Negative Cash Flow Mean a Company's Financial Performance Was Bad?
Financial statements, including the cash flow statement, provide the detail on a company's
financial performance. To fully understand a companys ability to cover expenses and make capital
expenditures, an owner must regularly review the businesss cash flow. Companies with positive
cash flow can reinvest the cash. Those with negative cash flow cannot.

What Is Cash Flow?

Cash flow is the amount of cash and cash equivalents entering and leaving a company. Cash flow is
what is actually available to pay expenses and make investments. A business derives its cash flow
from operations, meaning its regular business activities, as well as from investing and financing.
The cash flow statement records these cash inflows and outflows for a company during a specific
time frame.

Operations
On a cash flow statement, the operational cash flow clearly shows whether the way a company
creates and manages its earnings provides it with sufficient cash to cover all operational expenses.
If this cash flow is negative, the company cannot cover operations solely from running the
business. Negative operational cash flow could signify a growing company that is hiring personnel,
or it could signify a collections problem or poor debt structure.

Financing and Investing

When operational cash flow is negative, a company must generate positive cash flow from its
financing or investing activities. A company generates financing cash flow comes from obtaining
new debt, selling stock, retiring debt, or paying dividends. It obtains investing cash flow from
selling company assets, or from purchasing equipment or property. Growing companies typically
show positive financing cash flow from investors or lenders, but negative investing cash flow from
capital expenditures. Struggling companies may show significant positive investing cash flow from
the sale of assets to cover operations and debt repayments.

EBITDA
EBITDA is an accounting term that means "earnings before interest, depreciation and
amortization." It is another often-used measure of business cash flow. Analysts consider EBITDA
useful because it looks at a company's cash irrespective of its debt load. A company with low net
income and minimal depreciation and amortization, yet a high EBITDA, is carrying significant,
expensive debt. Companies with negative EBITDA will encounter financial difficulties unless they
obtain cash from non-operational sources.

Scenarios
Healthy growing companies will pursue suitable debt or equity financing in advance of its need.
Healthy mature companies generally have positive EBITDA and operational cash flow. Companies in
a turnaround situation will show negative EBITDA and operational cash flow, and minimal new
financing cash flow. Therefore, negative cash flow does not always mean that a company's financial
performance was bad, but it is always a sign that a company needs to take steps to better manage
its cash or to access cash from other sources.

REF: http://smallbusiness.chron.com/negative-cash-flow-mean-companys-financialperformance-bad-60010.html

How to - Simple Pivot Point

Calculator
1. Pivot is an important value here.
2. Look at the price of stock/underlying at 10:25-10:30 am. (half hour after market
opens)
3. For Resistance and support values, you can choose normal values or fibonacci
values. Both give good results. It depends upon you which suits you.
4. Keep a target of 0.75% or 1%. Put Stoploss of 0.5%.
5. There are various scenarios which can occur at 10:25-10:30 am.
1. The price is below the Pivot but above S1.
In this scenario, you should buy the stock/underlying above Pivot (If price
reaches above Pivot) and sell below S1(if the prcies goes below S1).
2. The price is above Pivot but below R1.
In this scenario, you should buy the stock/underlying above R1 (if the price
reaches above R1) and sell below Pivot(if the price goes below Pivot).
3. The price is very near to pivot (+/- 0.02%)
In this scenario, you should buy the stock/underlying above R1 (if the price
reaches above R1) and sell below S1(if the price reaches below S1).
4. The price is between R1 and R2.
In this scenario, you should buy the stock/underlying above R2 (if the price
reaches above R2) and sell below Pivot(if the price reaches below Pivot). the
important here is not to sell below R1. You must sell below Pivot.
5. The price is between S1 and S2.
In this scenario, you should buy the stock/underlying above Pivot (if the
price reaches above Pivot) and sell below S2(if the price reaches below S2). The
important here is not to buy above S1, buy only above pivot.
6. The price is between S2 and S3.
Same rule applies as rule 5. Buy above pivot sell below S3.
7. The price is between R2 and R3.
Same rule applies as rule 4. Buy above R3 sell below Pivot.
REF: http://www.pivottrading.co.in/pages/pivotPointCalculator.php

Candle Stick trend Spotting

Positive Trend Channel
Today Open >

Yesterdays Open

Today Low

>

Yesterdays Open

Today High

>

Yesterdays Open

Today Close >

Yesterdays Open

Ref: https://www.youtube.com/watch?v=Bnz_auy3Bwo

Best Moving Average for Day

Trading
By Alton Hill

Why Moving Averages are Good for Day Trading

Keeping things Simple
Day trading is a fast game. You can be up handily in one second and then give back all of
your profits shortly thereafter. As a trader, you need a clean way to understand when a stock
is trending and when things have taken a turn for the worse. When analyzing the market,
what better way to gauge the trend than a moving average? First off, the indicator is literally
on the chart, so you do not have to scan anywhere else on your screen and secondly it is
simple to understand. If the price is moving in a particular direction over 'x' periods then the
moving average will follow that direction. Unlike other indicators, which require you to
perform additional analysis, the moving average is clean and to the point. In day trading,
having the ability to make quick decisions without performing a number of manual
calculations can make the difference between leaving the day a winner or losing money.
Should You Go Long or Short?
Moving averages also provide you a simple yet effective way for knowing what side of the
market you should be trading. If the stock is currently trading below a moving average then
you clearly should only take on a short position; conversely, if the stock is trending higher
then you should enter long. When a stock is below its 10-period moving average under no
circumstances will I take a long position. I know, I know, all of these concepts are basic and
that is the beauty of it all, day trading should be easy. I have yet to meet a trader who can
effectively make money using a million indicators.
Best Moving Average for Day Trading
There are literally an infinite number of moving averages. There are weighted, simple and
exponential and to make matters more complicated you can select the period of your
choice. With so many options, how do you know which one is best? Since you are clearly
reading this article for an answer, I will share my little secret. For day trading breakouts in
the morning, the best moving average is the 10-period simple moving average. This is
where as you are reading this article you ask the question why? Well, it is simple; first, if you
are day trading breakouts in the morning you will want to use a shorter period for your
average. Reason being, you need to track price action closely, as breakouts will likely fail.

Please do yourself a favor and never place a 50-period or 200-period moving average on a
5-minute chart. Once you find yourself using larger periods this is a clear sign you are
uncomfortable with the idea of active trading. Now, back to why the 10-period moving
average is the best; it is one of the most popular moving average periods. The other one
that comes in a close second is the 20-period. Again, the problem with the 20-period moving
average is it is too large for trading breakouts. The 10-period moving average gives you
enough room to allow your stock to trend, but it also does not make you so comfortable that
you give away profits. In the next section, we will cover how I use the 10-period simple
moving average to enter a trade.
How to Use Moving Averages to Enter a Trade
So, let me say this up front, I do not use the 10-period simple moving average to enter any
trades. I know, that is completely contradictory to the title of this section, but I think it is
important to cover this topic. If you buy the break of a moving average it may feel finite and
complete, but stocks constantly back test their moving averages.
Now that the curve ball is out of the way, let us dig into how I actually enter a trade. Below
are my rules for trading breakouts in the morning:
1. Stock must be greater than 10 dollars
2. Greater than 40,000 shares traded every 5 minutes
3. Less than 2% from its moving average
4. Volatility has to be solid enough to hit my 1.62% profit target
5. Cannot have a number of bars that are 2% in range (high to low)
6. I must open the trade between 9:50 am and 10:10 am
7. I need to exit the trade no later than 12:00 noon
8. Close the trade out if the stock closes above or below its 10-period moving
average after 11 am
If you are like me these rules sound great, but you need a visual.

The above is a day trading breakout example of First Solar from March 6, 2013. The stock
had a nice breakout with volume. As you can see, the stock had well over 40,000 shares per
5-minute bar, jumped the morning high before 10:10 am and was within 2% of the 10-period
moving average.
Here is one more example, but this time it is on the short side of the trade.

This is a chart of Facebook from March 13, 2013. Notice how the stock broke the morning
low on the 9:50 bar and then shot straight down. Volume also began to accelerate as the
stock moved in the desired direction until reaching the profit target.
This is literally the only setup I trade. I believe in keeping things simple and doing what
makes money. As stated earlier in this article, notice how the simple moving average keeps
you on the right side of the market and how it gives you a road map for exiting the trade.
How to use Moving Averages to Stop out of a Trade
In theory when buying a breakout you will enter the trade above the 10-period moving
average. This will give you the wiggle room you need in case the stock does not break hard
in your desired direction. The above chart is the classic breakout example, but let me give
you a few that are not so clean.

The above chart is of First Solar (FSLR) from April 10, 2013. The stock had a false
breakdown in the morning then snapped back to the 10-period moving average. This is your
first sign that you have an issue, because the stock did not move in your desired direction. If
your stock fails, the 10-period moving average will provide a fail safe for you to gauge your
stock. Continuing on, FSLR stopped in its tracks at the 10-period moving average and
reversed down again only to trade sideways. At this point, you know that something is
wrong; however, you wait until the stock closes above the moving average because you
never know how things will go.
How to use Moving Averages to Determine if a Trade is Working
You have to know when to hold them and when to fold them. If we could all apply this logic
to business and life, we would all be much further ahead. In the market, I think we naturally
look for the perfect example of our trade setup. In reality, the majority of trades will neither
work nor fail, they will just under perform. Since I am trading breakouts, the moving average
must always trend in one direction. For me I know it's time to raise the caution flag once the
10-period moving average goes flat or the stock violates the moving average prior to 11 am.
Why I Do not Ride the Average
Before I get 100 emails blasting me for this one, let me qualify the title of this section. Yes,
you can make money allowing your stock to trade higher as long as it does not close below
the moving average. For me, I was never able to make consistent sizable profits with this
approach day trading. There was a time before automated trading systems were stocks
moved in a linear fashion. However, now with the complex trading algorithms and large
hedge funds in the marketplace, stocks move in erratic patterns. Couple that with the fact
you are day trading breakouts, it only compounds the increased volatility you will face.

So, to avoid all of the back and forth present in the market, I would have a 2% profit target.
On average the stock would have a sharp pullback and I would give back the majority of my
gains. To counter this scenario, once my stock hit a certain profit target I would start using a
5-period moving average to try to lock in more profits. So, it was either give the stock room
and give back the majority of my gains or tighten the stop only to be closed out practically
immediately.
It was a vicious cycle and I advise you to avoid this type of behavior. I did not begin to make
money in the market until I started selling into strength and covering into weakness. I
discovered that when I would scan the market looking for examples of my trade setups I
would naturally gravitate towards trades that were perfect in every sense: clean breakouts,
high volume and b-line moves of 4% to 7%. So, on some level I was training myself on a
subconscious level to expect these types of gains on every trade. This sort of thinking led to
a lot of frustration and countless hours of analysis. Where I ultimately landed and you can
see from the trading rules I laid out in this article, was to look at all of my historical trades
and see how much profit I had at the peak of my positions. I noticed on average I had two
percent profit at some point during the trade. I took that a step further and reduced it down
to the golden ratio of 1.618 or 1.62% to increase my odds.
Why you Need to Use the Default Moving Average
Technical analysis is clearly my method of choice when it comes to trading the markets. I
am a firm believer in the Richard Wyckoff method for technical analysis and he preached
about not asking for tips or looking at the news. Everything you need to know about your
trade is in the chart. One thing I tried to do early on in my trading career was to outsmart the
market. What I mean by this is I would take for example the 10-period simple moving
average and say to myself a simple moving average is not sophisticated enough. This
would lead me down the path of using something more colorful like a double exponential
moving average and I would take it a step further and displace it by "x" periods. If you are
reading this and have no idea, what I am talking about then great for you. What I was doing
in my own mind with the double exponential moving average and a few other peculiar
technical indicators was to create a tool set of custom indicators to trade the market. I
believed that if I were looking at the market from a different perspective it would provide me
the edge I needed to be successful. Well, this could not have been the furthest thing from
the truth. The market is nothing more than the manifestation of people's hopes and dreams.
To that point, if the majority of people are using the simple moving average then you need to
do the same so you can see the market through the eyes of your opponent. The art of war
says it best in Chapter 3, "So it is said that if you know your enemies and know yourself, you
can win a hundred battles without a single loss. If you only know yourself, but not your
opponent, you may win or may lose. If you know neither yourself nor your enemy, you will
always endanger yourself."
Common Mistakes when using Moving Averages

Using Moving Average Crossovers to Enter a Trade

Many moving average traders will use the crossing of the averages as a decision point for a
trade and not the price and volume action on the chart. For example, how many times have
you heard someone say the 5-period just crossed above the 10-period moving average so
we should buy? This action by itself means very little. Think about it, what significance does
this hold for the stock? Don't you think a moving average crossover of the 5-period and 10period will mean very different things for different symbols? I remember at one point I wrote
easy language code for moving average crossovers in TradeStation. I ran back tests on a
few stocks and the results where stellar. I was just sure I had a winning system; then the
reality of the market set in. The stocks began to trade in different patterns and the two
moving averages I was using began to provide false signals. Therefore, needless to say, I
abandoned that system and moved more towards the price and volume parameters detailed
earlier in this article.
Not Using Popular Moving Averages
Not using popular moving averages is a sure way to fail. What is the point of looking at
something if you are the only one watching? I am not going to beat this one to death since
we covered it earlier in this article.
Using more than One Moving Average
As a day trader, when working with breakouts you really want to limit the amount of
indicators you have on your monitor. I have seen traders with up to 5 averages on their
screen at once. In my opinion it is better to be a master of one moving average than an
apprentice of them all. If you don't believe me there was a study published in August 2010
by Ben Marshall, Rochester Cahan, and Jared Cahan that provided a detail analysis of
trading profits when using indicators. The study stated: "While we cannot rule out the
possibility that these trading rules compliment other market timing techniques or that trading
rules we do not test are profitable, we do show that over 5,000 trading rules do not add
value beyond what may be expected by chance when used in isolation during the time
period we consider." I am not ready to throw out all of the technical indicators in my toolbox
based on this study, but don't try to turn your indicators into the genie in a bottle.
Constantly changing the Moving Averages You Use
There was one point where I tried the 10-period moving average for a few weeks, then I
switched over to the 20-period, then I started to displace the moving averages. This trial and
error period went on for months. At the end of it, how do you think my results turned out?
Do yourself a favor, pick one moving average and stick with it. Over time, you will begin to
develop a keen eye for how to interpret the market. Remember, the end game is not about
being right, but more about knowing how to read the market.

Using Moving Averages to Gauge the Risk of Your Trade

The 10-period moving average is a great tool for knowing when a stock fits my risk profile.
The most I am willing to lose on any trade is 2% and as you read earlier in this article I will
use the 10-period moving average as a means for stopping out of my trade. One thing I like
to do is to see how far my stock is currently trading from its 10-period simple moving
average. If my stock is 4% above the moving average, I will not take the long trade. I
cannot go into the position knowing that I am already exposing myself to 4% worth of risk,
which is double my maximum pain point.
The below chart example is from NFLX on April 23, 2013. Some of you may look at this
chart and think wow, the stock is up 22% and on high volume. For me when I look at Netflix
all I see is a stock trading a full six percent away from its simple moving average when it was
time for me to pull the trigger. Since I use the moving average as my guidepost for stopping
out of a trade this is too much risk for me to enter a new position. The next time you look at
chart, try thinking of the simple moving average as a risk meter and not just a lagging
indicator.

Putting it all together

Let's talk through an entire trade so we can see how to effectively day trade using a 10period simple moving average.
The first thing you need to determine is the level of volatility you trade in order to establish
your profit targets. Remember your appetite for volatility has to be in direct proportion of
your profit target. For a deeper dive on volatility please read the article - how to trade
volatility. For me I trade breakouts on a 5-minute period with high volatility.

The above chart of United Health Group from 4/2/2013 has all the right ingredients for my
system. There is heavy volume on the breakout. The stock gives very little back on the first
retracement and breaks the high between the time of 9:50 am and 10:10 am. Lastly, the
moving average is within 2% of the stock price, so I am able to give the stock some wiggle
room. Based on this setup should I pull the trigger?

The answer is yes, but I am purposely showing you a trade that has failed. There are
enough blogs out there pumping systems and strategies that work flawlessly. Breakouts will
fail the majority of the time. You are simply trying to limit your risk and capitalize on your
gains. In this example, the stock broke out to new highs and then reversed and turned flat.
Once you saw the candlesticks start to float sideways and the 10-period moving average roll
over, it was time to start planning your exit strategy. True to my breakout methodology, I
would have waited until 11 am and since the stock was slightly under the 10-period moving
average, I would have exited the position with approximately a one percent loss.
In Summary
Moving averages are not the holy grail of trading, but if used properly can help you gauge
when to exit a trade and also help limit your risk. The rest my friend is up to you and how
well you are able to analyze the market. If you get nothing else out of this article, remember
that less is more and to focus on becoming a master of one moving average.
- See more at: http://tradingsim.com/blog/best-moving-average-for-daytrading/#sthash.04zAXK3A.dpuf

First Hour Trading Simple

Strategies for Consistent Profits

Assuming you have either started day trading or are looking to get into the game, I am going
to shock you in this article. What I will cover here would have saved me 20 months of
headache if I just had someone give it to me straight. Recent studies have shown that the
majority of trading activity occurs in the first and last hour of trading. Let me make this even
easier for you, only focus on the first hour and watch how simple it all becomes.
Why First Hour Trading
Simply put, trading during the first hour provides the liquidity you need to get in an and out of
the market. On average the market only trends all day less than 20% of the time. Most new
day traders think that the market is just this endless machine that moves up and down all
day. In reality the market is pretty boring. The one time of day which consistently delivers
on sharp moves with volume is the morning. Assuming you are doing this for a living you will
need some serious cash. Day trading isn't something you should undertake with your lunch
money. If you were trading with a $100,000 per trade how much volume do you think your
stock needs? If you are really reading this article the first response from you should have
been what's the price of the stock. Assuming you were already thinking that, you need tens
of thousands of shares trading hands every 5 minutes. Reason being, you need enough
volume to enter the trade, but also enough that you can potentially turn around in a matter of
minutes and close out the same trade you just put on.
Let's get more granular when we say the first hour

The first 5 minutes

Now that the market has opened. the first noticeable increment of time is the first five
minutes. I have no study to back this one up, but from my own experience and talking with
other day traders the 5-minute chart is by far the most popular time frame. Within the first 5minutes you will see a number of spikes in both price and volume as stocks gap up or down
from the previous days close. This will often be driven by some sort of earnings
announcement or pre-market news. This first five minutes is arguably the most volatile time
of day. There is no high or low range for the day and odds are the previous days range has
been eclipsed by the gap. With no clear boundaries for where to go, to short or buy after the
first 5 minutes in my opinion is nothing more than a gambler's paradise. If you are serious
about your trading career stay away from placing any trades during the first 5 minutes.
Below is a chart of NII Holdings (NIHD) which is one of the more volatile stocks on the
Nasdaq. Notice how NIHD gapped up on the open to a high of 9.05 only to come back down
to earth and close at 8.73. How do you think NIHD trended over the next hour?

First 5 minute bar

Let me not keep you waiting too long. All of you advanced day traders will say that the stock
continued lower because the stock had such an ugly candlestick on the first 5 minutes. Well
guess what, in this particular instance you would be correct.

5 minute reversal bar

Remember I am a day trader so I already know what you are thinking. You are probably
saying to yourself, well Al I can place a buy order above the first 5 minute candlestick and a
sell short order below the low of the candlestick. You may even take it one step further and
place your stop order neatly behind the high/low of the first candlestick to box in your risk.
Sounds simple enough right? Wrong! This is nothing more than saying to yourself that you
are going to gamble your money within a defined framework. While I do believe keeping
trading as simple as possible is the best means for creating wealth, this approach is just too
simple and unpredictable.
9:30 - 9:50
The 9:30 - 9:50 time segment will look odd to you because it is. Most traders will wait for the
first half an hour to complete and wait for a clearly defined range to setup. I have noticed
over the years that if a stock is going to head fake you, it will often do it at the 10 am hour.
Another reason I like 9:50 as the completion of my high low range is it allows you to enter
the market before the 15-minute traders second candlestick prints and before the 30-minute
traders have their first candlestick print.
After the completion of the 9:30 - 9:50 range you will want to identify the high and low values
for the morning. The importance of identifying the high and low range of the morning
provides you clear price points that if a stock exceeds these boundaries you can use this as
an opportunity to go in the direction of the primary trend which would be trading the
breakout. Or you can go against the primary trend when these boundaries are reached with
an expectation of a sharp reversal.
Below is another example of the stock NIHD after it sets the high and low range for the first
20-mintues.

High Low Range

At this point you have one of two options. Your first option is to buy the break of the 9:50
candlestick and go in the direction of the primary trend. I am of the opinion that when you
see stocks b-line like this for the first 20 or 30 minutes, the odds of the stocks continuing in
that fashion are slim to none. I personally like to see a stock bounce around a bit and build
up cause before going after the high or low range.
Your second option is to short the stock with the expectation NIHD will reverse in or around
the 10 am time block. I am not a fan of this approach either because you are just hoping
that the stock will reverse, but there is no real justification.
So, looking at NIHD what would you do at this point? The correct answer is you should stay
in cash.

Range Holds

As you can see in the above chart, NIHD floated sideways for the remainder of the first hour.
Do you see how sizing up the trade properly would have allowed you to miss all of this
nonsense.
9:50 to 10:10
The 9:50 to 10:10 time slot is where you will want to enter your trade based on a break or
test of the high and lows from the first 20 minutes. Now that we have already had our head
fake example earlier in the article, let's focus on one that follows the happy path.

Break Down

This is a clean example from Newmont Mining on 5/7/2013. Notice how the stock was able
to shoot down and build steam as the stock moved lower. In theory waiting for a break of the
range after an inside bar or a tight trading range will often lead to consistent profits. The key
thing to remember with the 9:50 to 10:10 time frame is this is the only window of opportunity
to enter new trades. If you place a trade at let's say 10:15 and you are trading the first hour,
it only provides you 15 minutes to close your position. Unless you are trading ticks, which I
think is a sure way to make your broker rich, you simply don't have enough time for the
market to move in your desired direction.
10:10 - 10:30
The last twenty minutes is where you let the stock move in your favor. This doesn't sound
like a lot of time, but if you step back for a second this represents a potential of 40 minutes
from the time you first entered the trade at 9:50. Now there is no law against you holding a
stock beyond 10:30, for me personally I allow my positions to go until 11:00 am before I look
to unwind. The key thing I want to get across here is that you get out of the mindset of
letting your profits run. I honestly get visibly frustrated when I hear people giving this advice
to new traders. In today's world there are way too many automated systems and retail
investors all clamoring over pennies, stocks no longer move in a linear fashion where you
can sit back and place your trades on cruise control. The amount of head fakes and erratic
behavior is just over the top. For me personally, setting a clear profit target is the best way
to ensure you take money out of the market on a consistent basis. If you want to read more
on this topic you can check out any of the following articles: Day Trading Targets and Trading
Plan - Key to a Successful Trading Business. Each of these articles will clearly breakdown
the importance of getting in a rhythm of taking profits.

So, the last 20 minutes of the first hour is not the time to just hang out and see how things
go. This is the time where you need to be on the lookout for closing your position and you
must have some idea of where you want to close the position. I personally like to have a set
percentage target that I'm shooting for while others may adjust this value based on the
volatility of the stock. It really doesn't matter over the long run because you will adapt your
trading strategy to your performance. The key thing is making sure you are coming from a
place of wanting to pull profits out of the market.
Why 11:00 am is a bad time
Most of you reading this article will say to yourselves, this makes sense. I should trade
during the first hour when I have the greatest opportunity to make a profit since there are the
greatest number of participants trading. Since I am a trader I know there are still a hardcore
group of you reading this thinking, I can make money all day. This is actually a true
statement. You can make money all day. The only problem is the vast majority of people do
not. You will see that around 11:00 am the volume just dries up in the market. This is
because the institutional investors and hedge funds realize that there is far more work and
risk to be had during the middle of the day than potential profits. The resulting price action
when the true stock operators are away from their desk is basically a lot of sideways action.
Stocks will breakout only to quickly rollover. Stocks will begin to move in one direction with
nominal volume for no apparent reason. Lastly, while there may be price movements, they
are so small that after commissions and time spent fighting the market it's just not worth the
headache. Oh how I wish I had come across an article like this back in the summer of 2007,
I may actually still have a few strands of hair on my head.
Just Settle Down
Think about it, in any line of work you want to follow the methods and strategies of the
people who are the most successful. Don't try to fight the market just for the sake of being
able to tell your family members and friends you were trading all day. You are in the
business of making money, not working long hours. If you think my experience isn't enough
reason to caution you, Thomson Reuters did a study and have concluded that 58% of all
volume on the NYSE occurs during the first and last hour of trading. Of course the bulk of
that trading is in the first hour. So, while one hour may only make up ~15% of the trading
day, it is probably accounting for 35 to 40 percent of all the trades on average. Again I will
ask you, why would you want to trade during any other time of day than the first hour. If I
can not sway you from your desire to be involved in the action of the market, then maybe at
least take a break between the hours of 11 am and 2 pm. While the afternoon does not have
as much volume as the first hour trading, you can still catch some good price swings. Funny
as I right this it makes me think of trading in terms of surfing. All we are trying to do on any
given day is catch some really good waves.
Hopefully you have found this article useful and it has provided some additional insight into
first hour trading and some basic approaches you can take in your day trading strategies to
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Summary first hour trading
1- No trade for the first 5 min
2- First 20 minutes --9.15-9.35-- find the range during this first half an hour
3- If the stock breaks out of the above range , trade with the breakout
direction (long or short)
4- If the stock is trading within the range, wait for it to reach these
boundaries and trade against the primary trend.
5- Second 20 minutes 9.35-9.55Find the breakout and trade as suggested
above.
6- Last 20 minutes -- 9.55 10.15 This is the time you allow your profits to
run. You can wait till a maximum of 11am or after 10ticks from the low
whichever is earlier. Within this last 20 minutes find a suitable place to
square off . Generally there may not be much movement till the after
lunch session.