Trading the open is a high risk/ high reward game. The moves can be bigger and quicker, but if you are on the wrong side, the rip can really hurt. Whereas patience and conviction payoff on longer term trades, aggressiveness and flexibility are the skills that help short term traders capitalize on the volatility right on the open.

Yesterday AM, 11/19, represented one of the better opening setups I’ve seen in the past few sessions. After breaking to new multi-month highs earlier this week, the SPY’s have bounced several times off of 110.50 (1100 in the SnP futures). On this morning, we gapped down right to that level. One setup that has been working quite well in this bull run has been to buy gap-downs in the market when we hit support levels. Well, I’m sure that on this morning, many traders on the street had this strategy in mind, and when we failed to rally on the open off of 110.50, there were certainly more than a few people caught on the wrong side, which led to a hard down move in the market below  this major support level.

As I mentioned, trading the open requires mental agility, aggressiveness, and a more flexible strategy than many traders are accustomed too. You have to be willing to cut losses very quickly, and often flip a position in order to get on the right side, but as we saw this morning, the profits for the prepared trader can be very big, and very quick.

Best of luck with your trading!