Secret Discovery Spits Money Out Of Stocks Like A Broken ATM!

Finance

Written by LanceJepsen

Friday, 28 August 2009

by LanceJepsen

The closing price is not equal to the opening price when it comes to trading in the stock market. You need to know that the closing price is much more important than the opening price. You are about to discover a little known truth that will have the stock market shooting out money like a broken ATM!

Let me jump right into this and teach you this incredibly profitable secret.

The closing price is the value set for a given stock by all market participants trading that stock. It is the final consensus of value assigned to a stock on any given day by the crowd. It is the price everyone sees after work. It is the final price displayed on all daily stock charts people research at the end of a given trading day. In the futures market, the closing price is very important because trading accounts are settled based on it.

Professional and institutional traders will trade all during the day. At market open, they take advantage of opening prices by fading gaps. They will buy low openings and sell high openings. They will then unwind those positions as the day progresses. They routinely trade against market extremes and bet on a return to normalcy for any given stock. When a stock hits a new high and then volume drops off, professional traders will sell which pushes the market lower. When a stock hits a new low and then volume begins to drop off on the sell side, professional traders buy which pushes the market higher.

Amateur traders like you and I behave very differently. Amateurs like us usually trade at market open and then drop off as the day progresses. Most amateurs have to go to work and so they trade on the west coast at market open before work. They don't check the trade again until after work when they get home. Even traders on the east coast will sneak in a buy or sell at market open while at work and then not check their trading account again until the end of the day. At market close, the participants who are still trading are mostly professional traders.

If you know this, you have a gigantic advantage! How? This means that opening prices reflect the consensus of amateur traders while closing prices reflect the consensus of professional traders. Study almost any stock chart and you will discover how often the opening and closing ticks are at the opposite ends of a candlestick. This means that amateurs and professionals are usually on opposite sides of a trade. The side you want to be on is the side of the professionals because they have more money. Trade with the professionals and not against them like most market participants.

Let's say a stock you are long in goes up to its day's high at market open and then drops the rest of the day and finally closes near its day's low. You need to close out of your short term position. Why? Because this gives you a signal that professional traders are fading against your long position.

About the Author:

I hope you make a ton of cash in the stock market after studying this article. For more of Lance Jepsen's free trading secrets please visit stock market

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