Traders Ask: Do You Wait for a Stock to Open?

Aug 10th, 2011 | By | Category: Mike Bellafiore's (Bella's) Blogs, Traders Ask
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Hi Mike,

I seem to recall you mentioning that one way to catch opening drives is by watching the first ticks of the stock when it opens. My question is: do you trade the first ticks of a stock when the specialist is not there yet, or do you wait for him/her to show up?

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Thanks in advance, and happy trading!

Bella Responds

Almost always I do wait for the stock to open. We know when a stock is open when NYSE first appears on the bid and offer. I would say that 90 percent of the time I wait for a stock to open.

I might not if the stock is really In Play and trading heavily in the premarket. I will watch to see very clear levels developed in the premarket and if the stock has liquidity and is In Play I may take a position if an important premarket level is violated. So if I am watching a stock and it is down 3 percent, normally does 2m shares a day and in the premarket it has already traded 1m, and I see a ton of volume at 30 and then the stock moves away from and below 30, I may get short using the 30 level as resistance. Certainly,yesterday with SPY was an example of when I might trade premarket.

The reason we generally wait for a stock to open is it is easier then to control our risk. The more liquidity in a stock the easier it is for us to control our risk. A stock that has opened usually offers more liquidity than one that hasn’t. Some traders even sit out the first 15 minutes of trading, for the stock/market to settle and when it is easier to control their risk, before they make a trade.

You can be better tomorrow than you are today!

Mike Bellafiore

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    Wasn’t aware of those caveats. 

    Thxxx Bella