Today's Quote: “Success is simply a matter of luck. Ask any failure” - Earl Wilson.

There are several good books out there about trading that should be on every trader’s must read list. If you were forced to choose one and only one, the only possible pick would be “Tools and Tactics for the Master Day Trader”. We are going to run a series of excerpts from the best selling book for the next series of lessons. Now in the words of the master trader himself, Oliver L. Velez…

SECRET #7: BUYING AFTER THE OPEN IS USUALLY BETTER

Despite the growing capability of buying and selling stock in the pre open market, the master trader knows that it is usually best to initiate stock positions (buy) after the stock market opens. Allowing the market to open first gives the trader a chance to know more accurately where the stock will open, which in many cases allows for a more intelligent decision. This becomes more critical when the environment becomes treacherous because gaps in share prices (up and down) at the open can be an unwanted nemesis for traders. Placing your order before the open not only contributes to these gaps, it increases the odds that you will pay at or close to the highest price of the morning. By simply waiting a few moments to see where the stock will open, and what side the novice crowd is leaning on, a trader can measurably improve the accuracy of his or her entries. Also, it should be remembered that stocks gapping open by more than 50 cents should be purchased based on our 30-minute gap rule. See details in Chapter 14. Gaps always change the approach and this change can't be made if you don't wait a minute or so to allow the market to open.

MASTER TRADING TIP

Greater access to Instinet (INCA), and other ECNs (Electronic Communication Networks), has brought pre- and postmarket play to the ordinary individual. Not too long ago, this was a privilege enjoyed only by the powerful, the wealthy, and the wise. But despite the fact that professional trading systems offered by companies like Executioner.Com have made trading before the open commonplace, we encourage our traders to largely stay away from the practice. While there are times when buying before the opening bell can be lucrative, more often than not the picture being presented is a false one. A great many games are played during these "outside" times. Because the volume is so scarce, manipulation and legal forms of price fixing often serve as death traps to the novice. On balance, the very best action is to wait to see what is real, and that will not be revealed until the game has truly commenced. Remember, there are no gifts on Wall Street. If you're getting something you feel you don't deserve, you will not want it when you finally get the real scoop.