Working a trade successfully in or out of a stock or ETF (exchange-traded fund) can be a precarious situation nowadays. The markets over the past couple of years have been a flurry of tornadic activity. Each day, you don’t know quite what you’ll find. Will the markets be up or take a nasty tumble downwards? Some days your guess is as good as mine. But, we have found ways we consider to be successful in trading in and out of positions. Here are a few key principles we believe might help!
Avoid the Market Open and Close
We feel it’s prudent to avoid the first 15-20 minutes of the open or close for buying or selling positions. This might come as a surprise to some, but the market does not open all at the same time. In actuality, the stock market is a rolling basket of stocks that are priced first, then the second basket, then the next basket and the next. Many advisors fall under the false notion that to get out ahead is the best plan of execution. In this case, the early bird doesn’t always get the worm. At the market open, the stock market needs a chance to price effectively. And depending on what stocks are in an ETF, you can have really poor price discovery and price execution at market open or close where there is a crazy rush for institutional players.
We believe 10am to noon and 1pm to 3pm (Eastern Standard Time) are ideal time periods for successfully transacting trades. In our experience, these times tend to have more stable pricing of securities and volume appropriate for trading in or out of a position.
There has been an uptrend in society of everything digital, including the availability of platforms, like RobinHood, to help those interested in trading. One big problem with this is the lack of knowledge of the current market and economic situation. When it all looks to be easy — that’s when we caution buyers beware! Right now at market all-time highs and historically high valuations, it is imperative to really know the stocks or ETFs you own and attempt to have balance in the approach you take to sell in and out of positions. A lot of times, these platforms give investors a false sense of security in their investments. They buy and when it goes down they sell. But if an investor isn’t able to get out of the way as the floor falls beneath them in a drastic market move down, it becomes a bad day at the craps table. Don’t fall into the trap of that false sense of security. The higher capital base with which to retire wins! And if you’re losing the gamble too often, then the loss of capital could be too big to come back from.
We believe whatever investments you’re making, make sure they are active, risk managed and passive in combination. Don’t bet the farm that the market is going higher forever. Try mid-day when buying or selling in the markets. Remember cash is king. The more you have, the better off you’ll be — so try not to lose it!
The views presented are those of Don Schreiber, Jr. and Matt Schreiber and should not be construed as investment advice.
Investing involves risk, including the loss of principal. Neither diversification, risk managed, passive or active management can guarantee a profit or protect against loss.
All economic and performance information is historical and not indicative of future results. This is not an offer to buy or sell any security. No security or strategy, including those referred to directly or indirectly, is suitable for all accounts or profitable all of the time and there is always the possibility of loss. You should not assume that any discussion or information provided here serves as a substitute for personalized investment advice from WBI or any other investment professional. If you have questions regarding the applicability of specific issues discussed to your individual situation, please consult with WBI or your chosen professional advisor. This information is compiled from sources believed to be reliable, accuracy cannot be guaranteed. WBI’s advisory operations, services, and fees are in the Form ADV, available upon request.
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