One thing that I repeat EVERY SINGLE MORNING in my Premarket Prep is this…
Do not trade premarket if you struggle with taking stops.
In other words, if you don’t have the stomach for losses or have trouble getting out of a stock when your position enters the red, you aren’t ready to trade premarket.
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The premarket session can start as early as 4 am Eastern and it continues until 9:30 am when the regular session opens.
Trading before the open is dangerous. Liquidity and trading volume are very low, which means a trader can lose his or her shirt in minutes…
With fewer buyers and sellers in the game than you, bid/ask spreads are larger, making it more difficult—if not impossible—to exit a trade quickly.
The lack of volume also intensifies volatility. If a stock starts moving, it takes only a little buying or selling pressure to send it running faster than usual.
But, you ask, if it’s so dangerous, why are people doing it?
There are good reasons for seasoned traders to trade premarket.
Read this article to find out more…
Yes, there are big profits to be made before the opening bell but I have other ideas…
You can totally avoid premarket trading and still make money if you do it my way.
My rule for traders is to wait until 9:45 am before entering a trade.
In fact, my favorite times of the day in the market are 9:45 and 2 pm.
Why?
Overnight news and pending trade orders have a tendency to cause volatility around the opening bell. This makes it easier to find good prices that come from large movements and are often unattainable later in the day.
However, I advise caution at the open…
By waiting until 9:45, traders have time to take a breath and thoroughly analyze the situation before diving in.
And why 2:00 in the afternoon?
The post-lunch trading period tends to be less volatile with more explicit price movement patterns and less noise than other times of the day.
Now let’s look at a recent big winner that soared during regular market hours.
I discussed many stocks yesterday morning in my Premarket Prep webinar, but one that I emphasized was both at the top of my low float scanner and on Oracle…
I always look for that confluence, being both a top low floater and having an Oracle signal, in a potential stock play.
If you’re interested in learning more about our algorithmic trading system, Oracle, find out all about it during my free live training webinar tonight at 8 pm Eastern.
Freight Technologies Inc. (NASDAQ: FRGT) was that stock that I told my audience to keep an eye on after the open… I saw it poised for a breakout.
And I wasn’t wrong…Neither was Oracle. I can’t take all the credit!
See the chart below for the morning price action on FRGT.
Intraday, 1-Minute Candles; Courtesy Stocks to Trade
So how did this work?
Oracle gave us the green bullish signal at $1.13 per share. We got that price around 9:45 (no joke!).
Anyone that entered the trade at that point and held FRGT until it peaked at $1.70 booked a 50.44% profit.
And that 50% spike lasted less than an hour.
That’s day trading, folks!
For those of you who are brand new to day trading or just want to brush up on your knowledge, read my article for beginners.
Besides Oracle, we have built in-house some other tools that help traders know precisely when and how to get into a play.
One of these is BreakingNews Chat which alerts subscribers to company news, posts, announcements…anything that could move a stock.
It’s no ordinary chat room. It’s run by a whole team of ex-Wall Street traders who use their 20+ years (each) of experience to give you fast, actionable, tradeable ideas.
Learn more about BreakingNews Chat here.
In the meantime, happy trading!
Have a great weekend everyone. See you back here on Monday.
Tim Bohen
Lead Trainer, StocksToTrade