Sometimes it`s wise not to be the early bird when stock investing, instead wait and see what the day will bring before you take action. more hints This rule protects capital and can be a good example. Let`s say you want to buy a stock, for whatever reason; a trend play, or a market rally that you think a currently hot sector will participate in.
Sometimes it`s wise not to be the early bird when investing in forex, instead wait and see what the day will bring before you take action. This rule protects your capital and can be a good example. Let`s say you want to buy a forex stock, for whatever reason; a trend play, or a market rally that you think a currently hot sector will participate in. The gap down is a good time to buy, but you know the market will be in a rally and the forex stock will gap up instead. But buying the gap up is a bad trade. What do you do now?
You use the 10 A.M. rule, and wait until after 10 A.M. for the right forex stock investing time to buy the stock. You should only trade if the forex stock reaches a new daily high after 10 A.M. Of course, you will use stops to protect yourself, like you would on any trade.
Anyone who`s followed the market knows that a forex stock will often gap up early in the morning, only to suddenly sell off and reverse into negative territory. You can avoid this risk by following the rule of 10 A.M. The forex stock may reach a new high even after 10 A.M. There is still interest from traders in the stock and it has a good shot of going higher.
Here's an example of how the rule at 10 A.M. can be applied to a gap-up: A foreign stock closes its day at $145. The company announces the split of two forex stocks for one after hours. The forex stocks open the next day at $161. Before 10 A.M., it reaches $166. After 10 A.M., the price drops and does not reach $166 for two hours. At 2 P.M., it hits $166.50. Using the rule of 10 AM, it is safe to purchase forex stocks.
Using a version of the 10 A.M. rule, you could watch for a hot sector to appear in the morning and follow the forex stocks in the sector that are up for the day. If the forex stocks are still making new highs at midday, they stand a good chance of finishing the day near their ultimate highs for the day, and could be good trading opportunities. This also applies in a down market and to stocks in forex that gap down, opening at prices lower than where they closed the previous day. You should not short forex stocks that have gapped lower unless they make a new day's low after 10 A.M.
Using the 10 A.M. rule ensures that you will never end up chasing and buying a forex stock when your chances of making a profitable trade are low. Remember, trading is all about probabilities. The more forex stock investing trades you make with a high probability of success, the more successful you will be. The 10 A.M. Rule is an important addition to your forex trading plan. It will help you avoid costly mistakes, and increase the number of stock investments that are profitable.