Avoiding the first 30 minutes of the market open (9:30 AM – 10:00 AM ET) is advised because this period features extreme volatility, erratic price swings, and high, unpredictable volume, often leading to "fake-outs". The market is digesting overnight news, causing stocks to gap dramatically, which can trigger stop-losses and lead to significant losses for inexperienced traders.
Key Reasons to Avoid the First 30 Minutes:
- Extreme Volatility and "Noise": The market is often chaotic as traders react to overnight news, creating violent, unpredictable price gaps.
- High Risk of "Fake-Outs": Stocks may break out in one direction only to immediately reverse, catching traders on the wrong side.
- Algorithmic Dominance: Algorithms and market makers often dominate the first 30 minutes, making it difficult for retail traders to time entries, as they often dictate the opening range.
- Wait for Direction: Waiting allows the market to establish a clearer, more stable trend, usually after 10:00 AM, providing better entry and exit points.
- Higher Costs: Increased volatility can lead to wider bid-ask spreads, making trades more expensive to execute.
Waiting allows traders to observe the market's initial direction and identify genuine momentum rather than reacting to volatile, short-lived price movements.
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