c02 JWBT016-Busby September 30, 2008 13:33 Printer: TBD
30 A FOUNDATION FOR SUCCESS
down the street. They enjoy a break from the stress of business and remove
themselves from the frenzy of Wall Street. After a nice meal, it’s back to
business.
I use these trading patterns to help me identify the best times for my
trading, especially my day trading. A day trader must have price move-
ment to make money. Why place a trade during the time of day when most
traders are having lunch? There will probably be little volume and little to
no volatility in prices. Therefore, the trade will be slow to work and the
risk of failure is increased. While enjoying their midday meal and stepping
away from the fighting on Wall Street, traders evaluate the session. Are
prices moving in the right direction? If they agree with the morning’s move,
they may take on more positions when they get back to the office, and this
will accelerate the action. Or are prices going the wrong way? Maybe their
morning play was not profitable. In the afternoon, there may be a shift in
sentiment. For this reason, I consider the middle of the trading day to be
a break in trading, and I reassess my play in the afternoon. Therefore, I
use the habits and trading patterns of traders across the United States to
identify times throughout the day in the United States when the likelihood
of success for day trading is optimal. I use this information to divide my
day into three trade zones. During these times I know that, as a rule, the
market will give me the volume and volatility that I need to make money
quickly. Once I know the best time to trade, I can concentrate on whether
to be long, short, or out of the market.
My first trade zone begins when the U.S. exchanges open. The Chicago
Mercantile Exchange (CME) and the New York Stock Exchange (NYSE)
open at 8:30AMcentral time. Once pit traders step into the pits and the
opening bell rings, prices start jumping. Traders take on their daily posi-
tions, and prices move quickly. Therefore, this is my first trade zone. The
rapid movement in prices allows day traders like me to take positions, ride
with the market to a quick gain, and exit with profits. The first 30 minutes
of trading tend to be pretty frantic, and I do not suggest that the novice
trade during this time.
Obviously, if the environment presents chances to make money, it also
presents opportunities to lose money and lose it quickly. Therefore, those
with little experience should not trade until prices have settled down a bit.
The time from 9:00AMuntil 10:15AMtends to generally offer some oppor-
tunities for the day trader. After this time, I rarely place a morning trade.
Volume leaves the market, and prices stagnate. With that slow movement,
risk increases and chances for fast profits diminish. As mid-day approaches
in New York and the eastern time zone, trade zone one comes to an end.
My second trade zone begins after lunch. Around 12:30PMI take a fresh
look at prices. Because many traders reevaluate their morning plays and
either shift positions or add to existing ones, this can be a good time for
my strategy. At least the volume has probably returned to the exchanges