Often new traders state, “I can’t trade the Open.”  And then they decide to just watch for the first 15 minutes of trading.  But doing this eliminates some easy money for you.  And understand it is not that you cannot trade the Open, it is that you trading the Open poorly.  But there are certain set ups that offer an excellent risk/reward that you should exploit.  Let’s discuss one of them.

APOL gapped down on the Open.  It opened near 71.  APOL opened below its closing price in the After Hours of around 74.  This is a sign of weakness.   APOL opened lower than its low in the After Hours of around 72.46. Opening below this low is another sign of weakness.  APOL is one of the few stocks that has held up well during this market rout.  Thus it has more downside than most stocks.

On the Open APOL failed to hold 71.  It’s first ticks were down.  Considering the points I made in the paragraph above and combining this with its failure to hold 71 on the Open, APOL offered an excellent risk/reward shorting opportunity.  A short below 71 would have offered you a quick 1 1/2 point downmove to 69.50.   It went down so fast you would have had little opportunity to cover APOL too quickly right after it dropped 71.  This would have been a chop.

During the internet boom one of my favorite trades was to buy Internet stocks that had gapped down on the Open, whose first ticks were up when they opened.  Since the market was so strong these stocks tended to bounce.  Sometimes they filled the gap.  Sometimes they bounced but then slowed before the gap was filled.  Sometimes they headed lower in which case you needed to quickly flip your position.  But if you were nimble a quick 10k was likely before 9:45AM.  

If you are struggling on the Open do not give up this time period.  It is not that the Open is not a good trading period, in fact, it is the best statistically for an intraday trader.  But you must measure your risk appropriately, and you must find set ups that offer excellent risk/reward opportunities.  Often new traders poorly calculate their downside with trades right on the Open.  But a conclusion should not be drawn that trading the Open is not profitable.  The only conclusion you ought to draw is that you are doing a poor job of evaluating your risk directly on the Open.

Over the years I have made a ton or money very quick right on the Open.  This is my favorite and most profitable period to trade.  Now I am quick so factor that in when considering my comments.  But you should develop some setups that are best for you on the Open.  And you should learn to exploit some easy set ups.

Best of luck with your trading!