End of Day Trading

The topic of "End of Day Trading" in the context of this article will refer to trading towards the end of the regular stock market session, not the "End of the World!"

Unfortunately for me, I came to write this article because of a mistake I made recently, and wanted to share my experience to try and help others avoid the same mistake I made.

Last Wednesday I noticed that on several occasions recently, while looking at daily stock charts, in the majority of cases if the market closed at its low, the next morning would open higher, and continue higher for a while.

I also noticed that when the market closed the end of day trading at the high of the day, the next day opened lower, and continued lower for a while.

Basically, a "Pattern" appeared to me and I hastily decide to try and take advantage of this "Pattern", so I shorted shares of CAR on Wednesday afternoon just before the close, at $11.41 a share.

The next day came along, and CAR opened HIGHER, not LOWER as I was expecting, and continued higher early on. I was frustrated with myself, for several reasons, so I closed out my position for a loss, at $11.88. As I did, prices moved up near $12.10 per share within a few minutes.

End of Day Trading

Note: The text I added with notes on the image above refer to short term intraday trading (which is NOT what I was doing, but am used to.) When I mention I was expecting a "false Breakout" in the image, I am refering to very short term, such as within "minutes". It actually was a false breakout, but over 2 days.

The reason I was frustrated with myself, was not because I had a loss, but because I am primarily an intraday scalper, or Day Trader, not an overnight position or Swing Trader. I went against my typical Trading Plan guidelines by trying to take advantage of a potential end of day trading pattern, when I had no business doing so.

Besides straying from my Trading Plan which actually works very well the majority of the time, end of day trading can be very, very volatile with irrational price movements. Therefore, to try and take advantage of trading during this time period, whether overnight or intraday, takes much more practice and experience, than I convinced myself I had.

Today, 2 days after I closed out my position for a loss, CAR is trading at $10.75 as I write. An approx. 6% potential gain that I lost because of my poor decision making. Worse than that though, had I waited until the next day as I usually do, Car was trading around $12.00 per share and has been lower ever since, potentially allowing for 3 consecutive days in a row of gains shorting.

The lesson here for me, and I hope for all readers, is not to stray from your Trading Plan that you have worked hard on and found to work. There is no reason to, and you'll be increasing your risk just by lacking the practice and experience trying to put new idea's into play.

Had I already had a trading strategy in place to look for and BUY potential pullbacks from downtrends, I would have presumably been ready ahead of time and went long instead of shorting when I did. The pattern is there, I was just looking for the one I was accustomed to. I was zoned in on shorting specifically.

There is nothing wrong with trying new strategies out, but put forth the time and effort to test them out before executing them, rather than make a decision in a few minutes as I did in this case.

Remember also that "end of day trading" can be one of the most unpredictable times of day to anticipate future price action. There is a lot of panic trading that goes on during this time. Not something that can, or should be, considered reliable in my view.




Return From "End of Day Trading" To "Stock Trading Strategies"


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