A question I’m often asked is whether or not it makes a difference to take a signal at the close or simply wait until the next day’s open.
I’ll answer this two-fold. The first answer is based upon the test results.
Using our methods, entering a position on the close has historically tested better than entering on the next day’s open. The difference is not dramatic but it is enough to make some difference. Even entering in after hours tends to be better than waiting until the next morning (all this refers to entering the position, not exiting).
From a lifestyle viewpoint though, there may be days when you can’t be in front of the screen at the close (as a friend of mine likes to say its “life interfering with trading”). Other responsibilities or commitments may not allow you be there in the late afternoon and you can only enter the next day. Based upon the many years of test results, there have still been historical edges entering this way but again, the edges are not as great as entering the night before.
Therefore, entering the next day on the open is acceptable and can still potentially be profitable. But in the perfect world, you should look to enter the majority, if not all of your opening trades, at the close.
Every day in our Battle Plan we’ll provide you with incisive, before-the-bell commentary and analysis on the day’s markets to help put your trading in context. We’ll give you suggested entries and exits for short term trading opportunities in stocks, ETFs and options that may be only hours away. And we’ll give you what many other people can’t: model-driven percentages so that you know the historical win rate going back to 1995 for every single trade idea – long and short.
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Larry Connors is CEO and Founder of TradingMarkets.com and Connors Research.