Sometimes it`s wise not to be the early bird when stock investing, instead wait and see what the day will bring before you take action. article source This rule protects capital and can be a good example. You want to invest in a stock for any reason. It could be a trend, or you might think that a hot sector is going to participate in a rally.
It is sometimes better to wait until the morning before investing in forex. You can then see how the day unfolds. The 10 A.M. rule is a great example of this concept, and is an example that protects your capital. Let`s say you want to buy a forex stock, for whatever reason; a trend play, or a market rally that you think a currently hot sector will participate in. The gap down is a good time to buy, but you know the market will be in a rally and the forex stock will gap up instead. But buying the gap up is a bad trade. Now what do you do?
You use the 10 A.M. rule, and wait until after 10 A.M. for the right forex stock investing time to buy the stock. You should only trade if the forex stock reaches a new daily high after 10 A.M. You will, of course, use stops as you would with any other trade.
Anyone who has followed the forex market knows that the stock price will often spike up in the early morning hours, before suddenly falling and reversing into negative territory. You can avoid this risk by following the rule of 10 A.M. If the forex stock does make it to a new high after 10 A.M., there is still trader interest in the forex stock, and it stands a good chance of gaining momentum and heading even higher.
Here is an example of the 10 A.M. rule on a gap up: A forex stock closes the day at $145. After hours, the company announces a two for one forex stock split. The next morning the forex stocks gaps up to open at $161. Before 10 A.M., it reaches $166. After 10 A.M., the price drops and does not reach $166 for two hours. It reaches $166.50 at 2 P.M. The forex stock is now safe to buy, using the 10 A.M. rule.
Using a version of the 10 A.M. rule, you could watch for a hot sector to appear in the morning and follow the forex stocks in the sector that are up for the day. The forex stocks that are still making highs by midday have a high chance of ending the day at or near their highest levels for the day. This could make them good trading opportunities. This also applies in a down market and to stocks in forex that gap down, opening at prices lower than where they closed the previous day. You should not short forex stocks that have gapped lower unless they make a new day's low after 10 A.M.
Using the 10 A.M. rule ensures that you will never end up chasing and buying a forex stock when your chances of making a profitable trade are low. Remember, trading is all about probabilities. The more stock trading forex trades that you do with a high chance of success, you'll be more successful. The 10 A.M. Rule is an important addition to your forex trading plan. It will help you avoid costly mistakes, and increase the number of stock investments that are profitable.