Opening range breakouts are key moments in the stock market where traders can identify a trend and establish a directional bias for the day. It’s a critical time that establishes the mood of the market for the rest of the day. As a trader, understanding the opening range and how to use it to your advantage can make all the difference in your trading success. In this blog post, we’ll cover the importance of the opening range, how to identify stocks in play, the significance of price action and key levels, and a trading checklist to ensure you don’t miss anything.
Understanding the Opening of the Market
A. Establishing trend and sentiment for the day
The opening range is the price range in which a stock or index’s price trades in the first few minutes or hours of the market’s open – often the first 30 minutes to the first hour. This range is crucial as it sets the tone for the trading day and provides important information such as the current price direction, pattern, and volatility of a stock.
B. Statistical significance of the opening range
The opening range has significant statistical importance as research has shown that the majority of the day’s price movement happens within the first hour of trading. Any breakouts or breakdowns outside the opening range can provide a stock’s directional bias for the day.
C. First hour of trading and opening range breakout strategy
Using an opening range breakout strategy can provide traders with a significant edge in identifying the direction of the stock in the first hour of the trading day. An opening range breakout occurs when a stock’s price moves outside the opening range’s high or low, indicating a potential change in price trend. Smart traders will wait for confirmation of the opening range breakout before entering a trade.
Trading Stocks in Play
A. Identifying stocks in play with catalysts
Stocks in play provide the best opportunities for trading as they have a catalyst to move the stock and trade volume. Catalysts can range from news releases, earnings reports, product launches, or industry trends. Identifying these catalysts can help traders understand the stock’s direction and potential for gains.
B. Establishing directional bias through research
Before taking a trade, traders must establish a directional bias by researching the stock and analyzing its fundamental and technical factors. By analyzing company performance and growth potential, traders can determine if a stock is worth investing in long-term. Technical analysis provides information on price trends, support and resistance levels, and momentum indicators. Equipped with this knowledge, traders can make informed decisions about direction and potential trades.
C. Considering momentum, volume, low float, and liquidity criteria
Momentum, volume, low float, and liquidity are essential criteria that traders must consider before trading any stock. Strong momentum shows that markets are accumulating the stock, indicating a potential trend. Volume and low float criteria are also significant as trading volume can increase volatility, and low float means that fewer shares are available to trade. Liquidity helps traders know if there’s enough supply to buy or sell.
Key Levels and Price Action
A. Importance of key levels in trading
Key levels are crucial support and resistance levels that traders can use to make informed trades. These levels indicate the price range in which a stock is likely to trade, providing a framework for potential trades. Key levels can be identified by analyzing historical patterns and price charts.
B. Confirming price action for greater confidence
Price action, or the movement of the stock’s price, provides insights into a stock’s direction. Confirming price action before entering a trade provides traders with greater confidence in their decisions, minimizing potential losses.
C. Utilizing opening range breakouts to trade key levels
Combining opening range breakouts with key levels and price action can provide traders with an effective strategy for making successful trades. By waiting for the opening range breakouts, traders can identify a stock’s direction for the day. They can then use key levels and price action to make informed trades and increase their chances of success.
Checklist for Trading
A. Bias and catalysts
Before trading, ensure that you have analyzed a stock’s catalyst and analysis to determine directional bias.
B. Momentum, volume, low float, and liquidity criteria
Review a stock’s momentum, volume, low float, and liquidity criteria before trading, providing essential information for making informed decisions.
C. Importance of a trading checklist
A trading checklist can help traders ensure they have covered all the essential criteria before making a trade. This helps them minimize losses and increase the success rate of their trades.
In conclusion, opening range breakouts are essential moments in the trading day that provide traders with vital information that can impact stock prices. By understanding opening ranges, identifying stocks in play, establishing directional bias, and utilizing key levels and price action, traders can make informed decisions and increase their potential for gains. With the inclusion of a checklist, traders can ensure that they have covered all the essential criteria before making a trade. Incorporate these strategies into your trading plan to level up your trading game. Happy trading!
Uncommon Education Trading Provides Day Trading Courses
Have you ever wondered what it would be like to make a living trading in the stock market? Uncommon Education Trading offers a unique approach to day trading that can teach you the skills needed to become a successful trader. With experienced mentors and a strong community of traders, Uncommon Education Trading provides a supportive environment where you can learn how to read stock charts, develop trading strategies, and manage risk. Whether you are a beginner or an experienced trader, their program is tailored to your needs. Don’t let the complexity of the stock market intimidate you – with Uncommon Education Trading, you can become a confident and profitable trader in no time.
As investors, it’s crucial to stay on top of market trends and plan for holiday closures. In 2023, there will be ten holidays on which the New York Stock Exchange (NYSE) and Nasdaq will remain closed. In this blog post, we will provide you with all the details on these holidays, including some important facts and figures.
The first-holiday closure for the year 2023 will be on June 19th, which is Juneteenth. It is an essential day in American history, and it’s great to see that the New York Stock Exchange and Nasdaq recognize its significance by closing for the day. However, it’s important to note that while stock markets will be closed, bond markets will also close on this day. Bond markets also shut down on nine out of the ten days the stock market remains closed, including Juneteenth. The only day when the bond markets close, but the stock market operates is Columbus Day.
Three Partial Closures
In addition to full holiday closures, the stock market will also have three partial closures during the year. These early closures will happen on the day before Independence Day, the day after Thanksgiving, and Christmas Eve. These events will provide investors with opportunities to analyze their portfolios and adjust them accordingly before the long holiday weekends.
Investors Should Know This
Investors should also know that the stock market will only close for more than three days running due to certain extraordinary circumstances like natural disasters or major national events. Although such cases are rare, three-day holiday weekends are typically the longest time the stock market goes quiet primarily to avoid creating unnecessary “investor angst.”
Another thing for investors to keep in mind is that bull markets take the escalator, while bear markets take the elevator. This means that bull markets usually increase gradually, while bear markets experience faster and more dramatic declines.
Making Informed Portfolio Decisions
In conclusion, knowing the holiday closures of the stock and bond markets in 2023, including partial closures, is critical for investors to make informed portfolio decisions. By staying up-to-date with market trends and events, investors can take advantage of the opportunities that market closures provide and maximize their profits. Remember, the more knowledge we have, the better-planned decisions we can make. Happy Holidays!
Learn How to Day Trade With Uncommon Education Trading
Have you ever wondered what it would be like to make a living trading in the stock market? Uncommon Education Trading offers a unique approach to day trading that can teach you the skills needed to become a successful trader. With experienced mentors and a strong community of traders, Uncommon Education Trading provides a supportive environment where you can learn how to read stock charts, develop trading strategies, and manage risk. Whether you are a beginner or an experienced trader, their program is tailored to your needs. Don’t let the complexity of the stock market intimidate you – with Uncommon Education Trading, you can become a confident and profitable trader in no time.
Leverage is an essential component of trading, and it plays a crucial role in determining the success or failure of a trade. Put merely, leverage is borrowing money to increase the potential returns of a trade. In simple terms, leverage allows traders to multiply the impact of their trades, both gains, and losses. However, understanding leverage is not as simple as it may seem, with traders requiring in-depth knowledge to make informed decisions. That’s why, in this comprehensive guide, we will delve into the world of leverage trading and explore its benefits, risks, and complexities.
Day Trading Buying Power
Day trading buying power is one of the most widely used forms of leverage in trading and is a feature offered by most brokers. Day trading buying power is the amount of capital that a trader can leverage for day trades. Accessing day trading buying power requires traders to have a margin account, which is essentially a loan account that brokers offer to their clients. However, it’s worth noting that there is a minimum account size required for day trading buying power, generally at $25,000.
Excess Maintenance Margin
One way to calculate day trading buying power is by using excess maintenance margin. Simply put, excess maintenance margin is the amount of cash or securities held on an account beyond the minimum requirement. By calculating the excess maintenance margin, traders can determine the day trade buying power they have on their account. However, it’s essential to understand that the excess maintenance margin is subject to change depending on the trades’ profitability or loss.
Day Trade Buying Power
Another way to calculate day trading buying power is to use the day trade buying power ratio. Generally, the day trade buying power ratio is determined by multiplying four times the excess maintenance margin. For instance, suppose an account has excess maintenance margin of $5000. In that case, the day trade buying power would be $20,000, which allows the trader to leverage $20,000 of capital on their day trades.
Pattern Day Traders
Pattern day traders are subject to specific rules and requirements that govern the amount of leverage they can use. To qualify as a pattern day trader, traders must hold at least $25,000 in their trading account, and the account must be marked as a Pattern Day Trader account. This designation automatically puts traders under specific regulations, such as the execution of four round trades within five business days.
Risks of Leveraged Trading
While using leverage can increase potential returns, it can also increase potential losses. Leverage magnifies the impact of a loss, which means that traders can end up losing more than they initially invested. For example, if a trader leverages 50:1, then a 1% loss would translate to losing 50% of the trade’s value. Therefore, it’s essential to have a risk management plan in place and to understand the risks associated with using leverage.
Margin Calls
Margin calls are a warning that brokers issue when a trader’s account falls below the minimum threshold required to maintain a margin account. When a margin call is issued, traders must deposit additional capital, or the broker will automatically close out their positions. Margin calls are essential risk management tools that protect both traders and brokers from losses that exceed the capital invested.
In conclusion, leverage is a double-edged sword in trading, and it’s essential to understand its benefits and risks before incorporating it into your trades. By understanding the various forms of leverage, such as day trading buying power or excess maintenance margin, traders can make informed decisions that can increase their returns. However, it’s equally crucial to have a risk management plan in place and to monitor the positions closely to minimize losses. We hope this comprehensive guide has helped you understand leverage trading and its complexities, and we wish you all the success in your future trading endeavors.
Learn More With Uncommon Education Trading
Have you ever wondered what it would be like to make a living trading in the stock market? Uncommon Education Trading offers a unique approach to day trading that can teach you the skills needed to become a successful trader. With experienced mentors and a strong community of traders, Uncommon Education Trading provides a supportive environment where you can learn how to read stock charts, develop trading strategies, and manage risk. Whether you are a beginner or an experienced trader, their program is tailored to your needs. Don’t let the complexity of the stock market intimidate you – with Uncommon Education Trading, you can become a confident and profitable trader in no time.
As a trader, you know that timing is everything in the stock market. Executing your orders at the right moment can make all the difference in your trading success. But what if you’re unable to monitor the market continuously? What if you want to place an order and wait for the execution for an indefinite period? That’s where GTC orders come in. A GTC or Good ‘Til Cancelled order is a type of order that remains valid for an extended period, anywhere from a day, a week, months or even years. In this blog, we will delve into the details of GTC orders and explore their advantages, execution, potential risks and more.
Understanding GTC Buy Orders
A. Definition of GTC Buy Orders
A GTC buy order is an order placed by a trader to buy a security like stocks, bonds, or derivatives set to expire on a specific date. This order type, typically administered through trading platforms or with the help of brokers, is open until it is filled or cancelled.
B. How GTC Buy Orders Work
GTC buy orders can come in different forms, but often traders submit them at a specific price. When the security hits that price, the trading platform or the broker executes the order, and it remains open for an indefinite period. These types of orders help investors buy stocks or securities at predetermined prices, reducing market volatility risks and allowing traders to execute trades while they are away from the market.
C. Examples of GTC Buy Orders
For instance, let’s assume that stocks of Company A are currently trading at $100 per share, and a trader feels that they would like to purchase shares of the company if they drop to $90. The trader places a GTC buy order for Company A at $90, and if the shares at any time drop to that level, the broker will purchase the shares on their behalf.
D. Advantages of Using GTC Buy Orders
One of the most significant advantages of GTC buy orders is that the trader doesn’t have to continuously monitor the stock market to purchase shares. Additionally, traders are less likely to miss out on the desired stock purchase because their order remains open until it is filled or cancelled. This order type lowers the trading costs of placing multiple orders and increases flexibility in trading schedules.
Understanding GTC Sell Orders
A. Definition of GTC Sell Orders
A GTC sell order is an order placed by a trader to sell a security at a specific price, which remains valid until it is filled or cancelled.
B. How GTC Sell Orders Work
GTC Sell orders stay active in the market until they reach the desired price, regardless of the time it takes for the market to move in that direction.
C. Examples of GTC Sell Orders
For instance, assume that a trader purchased 500 shares of Company B at $20 per share. They predict that the company’s stock will rise in the near future, but are hesitant to spend too much time monitoring the market conditions constantly. The trader then decides to place a GTC sell order for 500 shares of Company B at $25 that remains valid for two months, hoping to cash in on the predicted gain
D. Advantages of Using GTC Sell Orders
GTC sell orders are a reliable way of increasing portfolio returns without close supervision. These types of orders offer flexibility in trading schedules and enable traders to move ahead with different opportunities without constantly monitoring existing investments.
Market Hours and GTC orders
A. Overview of Market Hours
The market hours vary by exchange, but in general, stock exchanges close between 4:00 PM and 5:00 PM Eastern standard time.
B. GTC Orders and Normal Market Hours
GTC orders are only executable during regular market hours when the exchanges are open. Trading platforms will not perform automated trading during the trading holidays or weekends.
C. GTC Orders and After-Hours Trading
Some traders opt to trade after hours, particularly when there is breaking news or large market movements at a time of day when the market is closed. However, GTC orders are not executable outside of the standard market hours. If a trader wants to execute GTC orders after hours they must wait until the market re-opens, and market movements may cause a gap between the requested price and the final execution price.
GTC Order Execution
A. How GTC Orders Are Executed
GTC orders operate like other orders, but they remain open until they are filled or cancelled. Once the price point of an active GTC order is reached, the trade gets executed as a regular market order, closing the GTC order.
B. Filling a GTC Order
Filling a GTC order is identical to filling other types of orders – it’s done via the trading platform or through direct communication with the broker. The only difference is that the order remains open, waiting to be filled at a desired price determined by the trader.
C. Cancelling a GTC Order
One of the best features of a GTC order is its flexibility – traders can cancel an open GTC order without incurring additional costs easily. Canceling an open order can be done through the trading platform, and the platform will automatically cancel an order that does not get executed within the trader-specified time.
Dealing with Gaps in GTC Orders
A. Definition of Gap Up
A gap-up happens when a stock’s opening price is higher than its closing price the previous day.
B. How Gap Up Impacts GTC Orders
A gap-up provides a tricky situation for traders with GTC orders. This is because the opening trading price may be higher than the desired price point, and the trading platform will execute the order automatically without factoring in the gap.
C. Strategies to Avoid Gaps in GTC Orders
Strategies for avoiding gaps include monitoring the market exceptionally closely and utilizing stop-loss orders to mitigate the consequences of a market gap. Setting GTC orders at a limit price point that reflects the potential gap up is another method of managing gaps.
In conclusion, GTC orders offer traders the opportunity to execute trades automatically, providing more flexibility and control to the portfolio. With GTC orders, traders don’t need to be continually monitoring the markets, reducing trading costs and the impact of volatility. However, it is essential to understand the potential risks associated with GTC orders, such as the impact of market gaps and their influence on GTC order executions. Traders who understand these risks and apply the right strategies could benefit significantly from GTC orders in the long term.
Learn Day Trading Skills with Uncommon Education Trading
Have you ever wondered what it would be like to make a living trading in the stock market? Uncommon Education Trading offers a unique approach to day trading that can teach you the skills needed to become a successful trader. With experienced mentors and a strong community of traders, Uncommon Education Trading provides a supportive environment where you can learn how to read stock charts, develop trading strategies, and manage risk. Whether you are a beginner or an experienced trader, their program is tailored to your needs. Don’t let the complexity of the stock market intimidate you – with Uncommon Education Trading, you can become a confident and profitable trader in no time.
Investors are intimately familiar with indices like the S&P 500, Nasdaq 100, Dow Jones Industrial Average, and Russell 3000. However, there is another lesser-known index that might be crucial for the US stock market. The Wilshire 5000 is a market-cap-weighted stock index that represents the entire US equity market, including most publicly traded companies in the country. Although it doesn’t have the well-known status of its peers, Wilshire 5000 is very important to investors who want to gauge the overall health of the US economy.
In this post, we will provide a comprehensive guide to the Wilshire 5000 index. We will examine how it works, compare it to other popular indices, discuss its advantages and explain why it’s crucial to investors. We will also touch on ticker symbols and charting platforms used to track the index.
How the Wilshire 5000 Works
The Wilshire 5000 is a market-cap-weighted index. This means that stocks with a higher market capitalization (share price multiplied by the number of outstanding shares) carry more weight in the index. The market capitalization-weighting ensures that larger and influential companies have a more significant impact on the index than smaller ones. This approach provides a better representation of the market’s overall health.
The Wilshire 5000 adjusts its components semi-annually, taking into account changes in market capitalization, including new Initial Public Offering (IPOs) and delistings. Unlike the S&P 500, which has a fixed number of components, the Wilshire 5000 doesn’t have a fixed number of companies. As a result, the Wilshire 5000 is considered more accurate in reflecting the entire US stock market.
Advantages of the Wilshire 5000
One of the advantages of the Wilshire 5000 is that it is more representative of the entire US equity market than any other index. Indeed, it includes not only large companies that other indices track but also small and midsize companies that might not be present in other indices. Moreover, unlike other indexes that only measure the returns of significant stocks, the Wilshire 5000 captures the market’s full return, providing a more comprehensive view of the market.
Ticker Symbols and Charting Platforms
The Wilshire 5000 has two ticker symbols: W5000 and ^W5000. However, despite its importance as a market index, it isn’t present on many popular charting platforms. As a result, it’s often overlooked, although its importance can’t be overstated.
Abundance of Market Indices
In today’s world, there is an abundance of market indices. However, the Wilshire 5000 stands tall as one of the most comprehensive and representative of the entire US equity market. Even though it’s not as well-known as its more popular peers, it carries significant importance among investors. By weighing its components effectively and reflecting the stock market’s entire health, it provides a complete picture of the US stock market, including small and midsize companies. Regardless of whether one is an active or passive investor, this index is an essential tool in gauging the US economy’s health and performance.
Contact Uncommon Education Trading Today
Are you ready to invest in your financial future? Look no further than Uncommon Education Trading. Our comprehensive day trading education resources are designed to equip you with the skills and knowledge you need to succeed in the fast-paced world of trading. From beginner-friendly tutorials to advanced strategies, we have everything you need to take your trading game to the next level. Our expert instructors are dedicated to helping you achieve your financial goals, and our online community provides support and camaraderie every step of the way. Don’t settle for mediocrity – learn more today with Uncommon Education Trading.
Investors always seek to maximize their returns while minimizing their risks. This can be tricky to achieve using individual stocks, but there are alternative approaches, such as index funds and exchange-traded funds (ETFs). One kind of investment that has gained a lot of attention in recent years is the Dividend Aristocrats. In this blog post, we will explain what Dividend Aristocrats are, why they are significant for investors, the criteria to become a Dividend Aristocrat, the benefits of investing in them, and an example of a Dividend Aristocrats ETF. By the end of this article, you should have a thorough understanding of Dividend Aristocrats and why they can be a valuable addition to your investment portfolio.
To start, let’s define what Dividend Aristocrats are. A Dividend Aristocrat is a company in the S&P 500 index that has increased its annual dividend payout for at least 25 consecutive years. This achievement is not easy, and it demonstrates that the company is financially stable and has consistent earnings growth. Additionally, Dividend Aristocrats must have a minimum market capitalization of $3 billion.
Explore the Benefits of Investing in Dividend Aristocrats
The first advantage is stable dividends. Stable dividends refer to consistent and predictable dividends that companies pay to their shareholders. Dividend Aristocrats are excellent at providing stable dividends since they have a proven track record of dividend growth over the years. This trait makes them an ideal investment for income seeking investors, retirees, and others who rely on regular payments from their investments.
The Second Benefit is Market-beating Returns
This means that Dividend Aristocrats provide the potential for higher returns than the broader market. This is because these companies have a proven record of financial stability and earnings growth, making them less risky than other companies. Moreover, they are not immune to market volatility, but they tend to perform well during periods of market downturn because of their reliable dividends.
The Third Benefit is Good Yields
Yield is the percentage of return on investment, and Dividend Aristocrats usually offer above-average yields. This is because they pay out more dividends than other companies, providing investors with an excellent stream of income.
The Fourth Benefit is Outstanding Dividend Growth
Dividend growth is when companies increase their dividend payouts year after year, and Dividend Aristocrats have a consistent track record of doing so. This trait is essential since inflation erodes the value of income over time, but with Dividend Aristocrats, the dividend growth rate is likely to outpace inflation, protecting investors’ purchasing power.
Provide Diversification and Risk Reduction to Your Portfolio.
Diversification means having a mix of different asset classes to help reduce risk, and Dividend Aristocrats can offer this diversification. Furthermore, since Dividend Aristocrats are financially stable and have less volatility, investing in them can help reduce your portfolio’s risk.
Now that we understand the benefits of Dividend Aristocrats let’s explore an example of a Dividend Aristocrats ETF. An ETF is a basket of stocks that trade like a single stock on an exchange. In 2013, ProShares launched the S&P 500 Dividend Aristocrats ETF (NOBL). NOBL invests in all the S&P 500 index companies that have increased their dividend payouts for at least 25 consecutive years. Since its inception in 2013, NOBL has returned an average of 16.10% annually, compared to the S&P 500’s average annual return of 14.37%, making it a great addition to an investor’s portfolio.
In conclusion, Dividend Aristocrats offer income, market-beating returns, good yields, outstanding dividend growth, diversification, and risk reduction to an investor’s portfolio. NOBL is just one example of a Dividend Aristocrats ETF, but there are other ETFs that offer similar benefits. Dividend Aristocrats are not guaranteed to outperform the market, but their history suggests that they are likely to do so. By adding Dividend Aristocrats to your investment portfolio, you can increase your chances of achieving your financial goals while minimizing your risks.
Learn More with Uncommon Education Trading
Are you ready to invest in your financial future? Look no further than Uncommon Education Trading. Our comprehensive day trading education resources are designed to equip you with the skills and knowledge you need to succeed in the fast-paced world of trading. From beginner-friendly tutorials to advanced strategies, we have everything you need to take your trading game to the next level. Our expert instructors are dedicated to helping you achieve your financial goals, and our online community provides support and camaraderie every step of the way. Don’t settle for mediocrity – learn more today with Uncommon Education Trading.
