I’m pretty strict about when I trade. I typically stick to buying and selling the first and last 30 minutes of each day, avoiding almost everything mid-day. I find there to be too much noise throughout the day, and often find myself too easily faked-out of a position. Examining my trade log, I’ve found most of my successful trades to be late day entries and early morning sells (I highly suggest that you keep a trade log, or use Profitly and review monthly). You need to have an intimate knowledge of your track record so that you can focus on what works, and avoid what doesn’t.
Again, using the Tim Sykes’ Trader Checklist DVD method of scoring trades, I’ve assigned scores to different times of day (below). Ratings are out of 20—the higher the rating, the better. Please note that all times are Pacific.
As you can see, I value the first and last 30 minutes (6:30-7am & 12:30-1pm PST) the highest at a 20 rating. I will gladly take a high-odds trade during these times—preferably buying into close and selling at market open (or lately, selling after-hours). The 30 minutes following and preceding (7-7:30am & 12-12:30pm respectively), I score a 17. Sometimes you’ll get a delayed morning spike, or an afternoon breakout during these times, and I’m only slightly more hesitate to enter a trade then.
After 7:30am PST, you’ll notice that the ratings precipitously fall off a cliff, with the 9am-10am PST (12pm-1pm EST) time slot being the worst. I find that volume dries up during this time of day as east coast traders are out to lunch, literally. According to my trade log, I absolutely suck at buying breakouts between 9-12 PST (I have something like a 0% success rate, whereas the far majority of my late afternoon breakout trades are successful).
That’s all not to say that I won’t take a great-odds setup mid-day, but it would have to be home-run otherwise (a low-float, contract-winning, heavily shorted company that 3D prints weed wirelessly and accepts bitcoin…insert whatever other sector is hot at the time you’re reading this)
Throughout the day, I plug these values into my ratings spreadsheet and make a trade / no trade decision, along with position size, accordingly (see my previous post about using trade ratings to determine position size).
Again, you need to find what works for you personally. When I first started, I used to putz around, buying and selling at random times throughout the day until I took a step back, looked at my log, and realized what was working and what wasn’t.
Using these ratings help me avoid low-odds setups and keep me disciplined. I’ve also recently added a “Tim Rating” column on my trade log. I’m curious to see if there’s a correlation between rating and success of the trade (my thesis is strong correlation).
Play to your strengths people & stay disciplined!