If the title sounds a little confusing, it was meant to. The issue to be discussed today, is not just ‘when’ to trade. There are trades that can be done any time the market is trading. That does not mean that you should be trading all day long, it just means that the times you pick to trade can be any time, IF you know what to trade. That is the point of this article.

That was the opening paragraph last week, in part one of this three part series. Last week we looked at some ‘pre market’ organization, and we discussed the first reversal time, 9:35 (all times are Eastern, New York, market time). We then mentioned the next two reversal times, 10:00 and 10:30. This week, we will talk about those two key times, as well as the beginning of the ‘lunch hour’.

The Morning Reversals, 10:00 and 10:30: There is also a minor reversal time at 11:15. It is simply amazing how many traders do not use the reversal times to their advantage. This probably spawns from the fact that many traders do not even know or understand them. If you are one of those traders, you are going to learn something that will change your trading career in the next couple of paragraphs. A picture says a thousand words, so look at the charts below.

These are three five-minute charts of the QQQQ from the last couple of weeks. We generally give the reversal times a window of 5-10 minutes on each side. The key is when the VCM buy or sell setup occurs, at the approximate time. The numbers ‘1’, ‘2’, and ‘3’ show the three reversal times we are discussing. They are all happening ‘right on the money’, though they don’t need to in order to be effective.

Note, that the 10:00, 10:30, and 11:15 reversal times form a reversal, every time, and one of them usually sets the high or low for the day, or at least for the morning. Sometimes, when showing a technical pattern like this, many charts are looked at to find the really nice one to show people. That is not the case here. This is typical of what you will find every day. Over the last three weeks, there are only two days that didn’t have at least two reversal times clearly work, as we had two ‘power trend days.

The only time that you will not find at least two of these three reversing the market is when we have a ‘power trend day’, because the very definition of a power trend day is that the market carries a trend one way all day. Sometimes these days don’t begin until the 10:00 reversal time puts in the first reversal, but these power trend days are rare; usually one every other month.

Don’t believe it? No problem, go take a look for yourself. Go print out a bunch of five minute charts. Print them from the market, the futures, or your favorite stocks. Print some from this week, some from a month ago, some from two months ago. It doesn’t matter. Then go through and draw vertical lines at 10:00, 10:30, and 11:15. You will be shocked and amazed that virtually every day, you have drawn lines though the high and low of the day, or at least the high, until much later in the day.

And you thought trading was tough.

The next time period to look at is the beginning and ending of lunch. These times can change a little depending on if the market is ‘trending’ or choppy. Generally, the last true move ends around 12:20. We often count lunch as starting at 12:00, but if there is a strong trend in place, it may follow through until 12:30. On strong trend days, the last reversal around 1:30 often sets the trend back in place. If it is a choppy market (80% of the time), lunch may stay choppy, until the 2:15 reversal time. This one is usually in stone, and the whole lunch concept, as well as the afternoon reversals, will be discussed next week.