Imagine for a minute that its 9 AM and 30 minutes more the market will open. You have filtered some stocks the night before and came up with a watch list. You have a good watch list. You told yourself the night before that you will buy the best stock on your watch list. When the market opens, one stock on your watch list went up 3%. You bite your lips and say “I knew this stock was good. IT IS ON MY WATCH LIST!” So in excitement you hurriedly put in a buy order and it was filled. You are now very confident that it is going to go up more. Few minutes later the stock you bought went down a little. Then a little bit and a little bit more. By closing (When we use the term closing price we are referring to the final or last price a stock), the price of that stock was the same as it was the day before. In your portfolio you are down -4.19%. You bought it when it was up 3% plus 1.19% tax and fees.
Nangyare na ba yung ganito sayo? I bet you have experienced this before.
Before we continue, if wala ka pang idea about paano magread n chart kindly read this blog post first.
Just to refresh you all. This is a candle. Representation yan ng galaw ng price sa isang araw.
Here is the closing price or EOD price and the opening price.
That chart uses day as time frame. Highlighted on the chart is where you enter if you used mama as your strategy. Lets break this down on a lower time frame to see the whole picture. Let us use 1 hr.
If you break down the candle into 1 hr time frame you can see that at 9:30 nag open siya sa mataas na price at bumaba. By closing nasa mas mababa na siya na price.
Maraming chance na mapabili ka higher than the price kung saan sya nagclose if you bought earlier.
The difficult part of trading lies in conquering your inner demons, not in finding entries or in comprehending how to read a price chart. Kahit anong ganda ng pag screen or pag filter mo a night before, two nights before even a week before. Kahit anong ganda ng watch list na ginawa mo. Kapag nasa loob ka na ng merkado sari sari na na emotion ang naglalaro sayo. Kadalasan early ka napapabili kaya ang average mo mas mataas kesa sa closing price. The opposite is true na kapag early ka nag entry at nagclose siya sa higher price ay mas mababa ang average price mo kesa sa closing price. It happens but not as often as you having a higher price kesa sa closing price. Why? Grabe ang volatility sa pag open ng market. Those first few minutes. Laki ng spread at grabe ang volatile ni PSE. Normally, mga traders yun na excited makabili ay bumibili kaya napupush ang price pataas. After nila makabili wala na gusto bumili kaya bumababa ang price. During the first 15 minutes of trading, spreads are typically at their widest, and prices can be very volatile. The more experienced you are as a trader mas nahahandle mo na maayos ang opening ng market kaya it can be a good source of profit but since I’m doing this blog for newbies at dun sa mga wala pang 5 years sa trading let me stick lang muna sa mga ideas na hindi kayo mapapahamak. One day I will do blog posts about day trading. Darating tayo dun.
Yung GUT, (Give Up Tomorrow Program) are traders na I’m currently mentoring for free, hindi sila sumisilip sa market unless EOD if wala sila position. They will scan and filter stocks at night. They will make a watch list. By 3:15 onwards, dun pa lang sila sisilip sa market to see kung alin na stock ang pasok sa watch list nila at tsaka nila bibilhin. Why? Here is why according to thetraderisk.com.
Less decision making. Spending less time in front of the screens means you will have less data to interpret and therefore fewer decisions to make. Less decision making has two primary advantages. First, mental capital and quality decision making is a finite resource for all you humans out there. By exposing yourself to markets all day you’re going to run the risk of burning out and be prone to making mistakes a lot quicker. Second, having fewer decisions reduces the chances of tinkering with trades unnecessarily. Second, having fewer decisions reduces the chances of tinkering with trades unnecessarily. You’ve likely heard the cliché: a trader is his own worst enemy. Well, that directly applies here. By staring at markets throughout the day the odds are greater that you will over-manage and mess around with your trades instead of letting your original trade plan play itself out. By trading closing prices, not only will you maximize and focus your mental energy, but you will also minimize your chances of harmfully over managing trades.
You will spend less time in front of the screen. Not having to sit in front of the screens all day watching flashing green and red numbers tick by tick is a huge check mark in the pro column. Very simply, trading end of day makes best use of your time. Think about the cumulative time savings over the course of just one year. Avoid unnecessary volatility and false moves. Intraday action can be very noisy . Take for example, a stock that breaks out past your trigger buy level just 20 minutes into the market open. You see the move, you verify the setup, and you go ahead and place your order in the direction of the breakout. Flash forward 5 hours later near the market close and the stock is making new lows on the day and the breakout has been completely rejected. Your breakout that was perfectly valid and looking great in the morning is now no longer valid. Of course, acting on intraday movement creates just as much opportunity as it does risk. The bottom line, trading end of day prices smooths out the day to day noise and gives you fewer, cleaner data points to work with.
End of day buying focus on more reliable signals. In the game of poker, the most desirable position at the table is the last person to act, this is called being on the button, otherwise known as the dealer. Why? Because you get to see everyone else make their decisions and place their bets before you do. There’s a ton of value in that. Trading the markets is no different. By waiting until the market close, you get to see what has been deemed “fair value” after all of the news and information has been digested for the day. Acting after everyone else has placed their bets, gives you more confidence that the price you are seeing reflects the true near term intentions of the market. This is a great way to decrease the chances of buying into a false move.
Added layer of discipline & peace of mind. Because this approach only requires placing orders once a day, the very earliest exit wouldn’t be until the next day. You won’t be day trading or making multiple decisions about a single stock throughout the day and because of this, you will have a more relaxed, and hopefully more controlled trading experience. The great behind the scenes benefit of this approach is that it naturally instills a layer of discipline into your process. There’s no jumping the gun as soon as a stock begins to move. You’ll need to learn how to sit on your hands and watch the story unfold a little longer before getting involved.
This makes sense right? This is very hard to do though. Trust me.
Even GUT members took months bago malearn to. The fear of missing big moves is too much. Tipong kapag di ka nagbukas sa umaga at sa EOD ka lang bibili baka ma miss mo pag ceiling ni stock ganito or paglipad ni stock ganyan. Di ka in sa karamihan. Wala kang excitement.
I always remind them na HINDI PO NAWAWALAN NG OPPORTUNITY SI PSE. namiss mo pag lipad noon ni KPPI? Lumipad din si PPG. Na miss mo lipad ni PPG? Lumipad din si FRUIT. Namiss mo lipad ni fruit? Lumipad din si Bcor. So on and so forth. Walang katapusan na opportunity meron sa PSE. Yung nauubos alam mo kung ano? BP mo!
You don’t need to agree with me. Try to recall your past trades. Would most of your trades have been better if EOD ka nag entry?
First week ng GUT I asked them to find a hobby or anything na makakapag pa busy sa kanila sa trading hour. Manood netflix. Manood youtube. Maglaro ps3. Magfocus sa trabaho. Anything lang na makakapigil sa kanila sumilip sa merkado if wala silang hawak. They were so used na kumukuha ng excitement sa stock market. Imagine all weekend nagfilter ka ng stocks. May nagawa ka na watchlist at sa tingin mo mga lilipad talaga ang mga napili mo na stock. Saturday pa lang gusto mo na magbukas ang market. Di ka na makatulog. By monday, 8 AM pa lang nag aabang ka na na bibili. Pag open ng market bumili ka agad only to feel disappointed by closing na mas mataas ang average mo kesa sa closing price ng stock na nabili mo.
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