08 April 2022
For many people, a typical day for a stock-market trader appears to be glamorous, fast-moving and ultimately financially beneficial. In reality, the majority of activity is preparation to give a solid foundation for the day’s trading. That is not to say day traders do not think on their feet but a lot of the hard work is done before the market even opens.
The typical day trader will wake early in the morning, check the latest financial news, rumours and market indices across the world. This is also the time to see which companies have news and results due today, potential knock-on effects and whether there may be trading opportunities. Akin to a runner doing miles and miles of training before a race, unless a day trader is willing to put in the hard research miles their success will be limited.
While we have futures markets and price indications before the official open, the first 30 minutes of the trading day can be hectic. This is caused by a raft of news including company results, updates on significant events and even speculation ahead of major economic figures to come. This frantic activity in the early minutes of the trading day can prompt two very different approaches:-
• Sit on the sidelines
It may surprise many to learn that some day traders prefer to sit on the sidelines during this period of often frantic trading. Letting market settle down, volatility reduce and a greater level of visibility begin to emerge, only then will they begin to take positions.
• Trading the volatility
Other day traders revel in the early minutes of the trading day, volatility, huge fluctuations in prices and in many cases opportunities to bank a quick profit. On the flipside, taking a wrong position in the early minutes of trading can sometimes set the tone for a difficult day.
Central banks tend to announce policy updates and interest-rate changes later in the day. For example, Bank of England MPC minutes are released to the market at midday. There can sometimes be a lull in trading activity in the early afternoon as investors take stock and timeout for a quick snack. However, just as quickly as the market goes into a lull it can spring into life!
Even though the vast majority of company announcements are made either premarket or post-market, this does not stop regular updates and speculation through the day. As day traders rush to close a position towards the end of the day, investors with a slightly longer timescale may be presented with some interesting trading opportunities. It all comes down to risk reward - do you want the added risk of an open position overnight?
The assumption that the day is over when the stock market closes is a fallacy. Well after stock-market trading hours come to an end, the news continues to flow as does the often intense speculation. Many companies in international markets will announce results outside of market hours to give analysts time to digests data, often in the hope of avoiding extreme volatility. Using an array of different derivatives, it is still possible to trade many stocks outside of traditional hours. So, the hours outside of the traditional trading day can still be hectic.
When traders finally get the chance to sit down, relax and take in the action of the day, they can update their records and plan ahead for tomorrow. While day traders will be acutely aware of their rolling profit and loss throughout the day, updating records and perhaps learning from stock movements (and trades) during the day is very important. What next? You’ve guessed it, rinse and repeat….
Here at Global Investment Strategy UK Ltd, we appreciate and embrace the need for reliable trading platforms. Our ongoing investment in new technology allows us to remain competitive on service and dealing charges. Confidence in your broker can be as important as confidence in your own trading abilities.
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