Monday, October 22, 2007

Fifteen Minutes

Not of fame but of volatility. Something that I am gradually (and painfully) learning is it often pays to wait 15 minutes after news is announced or the market opens to make a trade. During those 15 minutes the market is often very volatile. Often the initial market direction after news is announced is opposite to its eventual direction: a so-called "headfake". In many cases, after fifteen minutes, market direction is much clearer. I'm thinking about Google earnings releases, FOMC announcements etc as volatility inducing events. Of course, if there isn't such a period of volatility you may miss the move. You miss out on making money, but at least you didn't lose any.

Similarly, I've recently discussed when to trade the market open. A well known strategy in the US markets is to trade a breakout from the range of the first 15 minutes of trading from the market open.

What do you think?

1 comment:

Adventures In Money Making said...

yup, trading during earnings season can be very volatile.

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