When Not to Trade the Open
The Fine Line Between Volatility and Chaos
Some traders aren’t going to want to hear this…
But the open may be your worst enemy.
Now… bear with me here.
I love the open… I’ve spent years focusing on it. Trading the opening auction on FTSE stocks. Watching YM and NQ opens like a hawk.
And that time of day has been very kind to me over the decades…
I always believed it to be a great time to trade misprices, over reactions, and recurring patterns.
But let’s be honest, it can sometimes be a trader’s worst enemy…
TRADING THE OPEN
We all know there’s a fine line between tradable volatility and random noise.
Part of the skill of a trader is to recognise the difference, and it’s not like the market waves a flag shouting “I’m tradable vol today… or, don’t trust me, I’m algo-driven noise.”
You have to make that assessment yourself…
Get it right, and you’re often rewarded with beautiful, clean trades that work very quickly. (There’s not much more a trader can ask for!)
But misjudge it, and the open can dish out a brutal punishment…
Daily loss limits tagged before you’re even finished your coffee, tilt-inducing stop-outs, or face-ripping moves.
And let’s be honest here… there’s NOTHING more frustrating as a day trader to be all geared up for the day ahead and hit your daily lockout in a few misjudged trades.
It’s a real confidence crusher…
Yet the seduction of being ‘done for the day’, hitting a 10R monster minutes after the bell, lures traders back in time and time again… even when there’s no real pattern.
I spoke to a super-experienced trader the other day who has decided to drop the open for now… he thinks there’s more edge avoiding it.
And that’s the key…
Where’s your biggest edge?
When you deposit your profits, the bank manager doesn’t ring up and say… “Is this money from trading the open? I can’t accept it if not.”
Profit is profit…
And so maybe the right thing is to red zone the open for now.
Calm things down a bit.
Let the first hour play out, calibrate to conditions.
- Is this turning out to be a trend-type day or a rotational one?
- Is VWAP in play? Which levels have held?
You get the idea… you’re using the open as an evidence-gathering exercise to inform your next move rather than trying to profit from it.
And you know me by now…
If you tell me you’re smashing it out of the park trading the open, I’d always say, “Good, keep going, double down on what’s working…”
But if you find the open a bit too much of a gamble, then it’s ok to avoid it for now…
We can get so caught up with our identity as a trader that sometimes we forget our job is simply to make the most amount of money possible with the least amount of risk.
And that might mean changing your style, or your market, to leverage your skills, and stop playing the game on hard mode.
Maybe something to consider…