When to avoid trading
There are certain times of the day that a day trader should not have a position in the market. These are times when the market is exhibiting unusually high volatility that is either due to the time of day or because the market is digesting information.
Either way, these periods tend to create heavy levels of volatility that can cause the market to create random price swings that can create unnecessary risk to your position.
Many traders like trading during these times specifically because the market exhibits such volatility, but the direction of the volatility is highly unpredictable so in effect the trader is gambling that the report or announcement will be in the same alignment as his position.
I highly discourage anyone to trade this way, it is extremely risky and it’s pure gambling on the outcome of the report and how the markets interpretation of the report at that particular moment.
Some traders rationalize this as a trading strategy, however since the information being released is completely unknown and more importantly the reaction to such information is even more random than the information itself, it is the same thing as going to a casino and trying to figure out if a roll on roulette will be red or black.
Most professional traders avoid having an open position either 5 minutes before or seven minutes after any major fundamental news and announcement report is released, this is called the 5 minute trading ban.
Most fundamental reports tend to be released at the same day of the week and generally at the same time each week or month.
The quickest way to find out if there is a report or announcement that will be released later in the day is to turn on CNBC for about 15 minutes before the opening bell.
The financial news station usually announces through out the day when what report is scheduled to come out and what time the report is scheduled to be released.
Another way to find out if there is an economic report or announcement that is scheduled to come out later in the day or the week is to go to econoday.com.
You can see a full calendar of all the scheduled fundamental news reports and announcements that are scheduled weeks in advance on this website.
There is the economic calendar section that you can go to from the home page. Once you click on the calendar, you may see a red star next to a particular report; if the red star is present it’s considered a market moving announcement.