When to trade the open versus when to avoid trading the open!

Firstly, I must define what I mean by the "open". In this post, as well as any other forum in which I frequently post, like Twitter, you will often see me mention the "open". By the open I am referring to the 15 minute period immediately after the official open of the US markets at 9:30 am EST or essentially the period 9:30am - 9:45am EST.

I am making this post as a reminder to myself as much as I am intending to share my experience/knowledge in this regard.

With that out of the way, on to the meat of this post.

How do I now determine whether or not I should trade the open?

1. Viable candidates (Stock selection/gap scanner): candidates that are viable to be traded at the open must come from the gap scanner and the gap scanner only. So it follows therefore, that if there are no candidates on scan or no candidates on scan that I like on a particular day then I should not be trading the open on that day! That's not to say I should not trade on that day at all but I should not be initiating any trades during the open on that day.

2. Pre-market spread and order flow: now, assuming that there are one or more candidates on the gap scan that I like then I can move onto the second step by around 9:15am EST or so to add them to my DAS market viewer. This then allows me to observe their spread and order flow in pre-market. If the spread is whippy and volatile in pre-market then its also very likely to be the same at the open and the same pretty much goes for order flow. This is why I often trade stocks I like in pre-market in my SIM account to get a feel for their spread and order flow. If these are not great then I should not be touching that stock during

the open! That's not to say I should not touch the stock at all on that day but definitely should be trying to trade it during the open.

3. Pre-market price action/technical set-up: third and finally, if the stock is over extended on the 30 minute chart (up or down 3 or more consecutive candles or up or down a huge candle), assuming you generally do not like taking counter trend trades at the open as is the case with myself, then these stocks should be avoided. Ideally you want to see a nice tight pre-market consolidation on the 30-minute chart heading into the open or at the very least the stock should have put in a tight consolidation on the 5-minute chart heading into the open. If the stock is extended on the 5-minute just before the open then it's a definitely an avoid unless you're looking for a counter trend play. 

So that's about it. Simple and easy rule but yet extremely hard to follow! lol Hope this helps your trading. Best of luck and thanks for reading!