Day Trading With The Trend Or The Importance Of The Opening Price

Traders have their own opinions about trading with or against the trend. Most of them will try to catch the tops or bottoms.

The rest will try to flow with the trend.

Although many traders are more than happy to dole out this advice i.e. trade with the trend, most of them (including me) have their own versions or definitions of the so-called trend. After all, what exactly is a trend and how do you determine it at any given point of time?

I have read in a few forums where traders chime in regularly that it is easy to determine the current trend of the market. According to these self-proclaimed experts, if the price or the candlestick chart is moving downwards from the left to the right, then the trend is down.

Likewise, if the candlestick chart showing the price is moving upwards from the left to the right, then the trend is upwards.

Do bear in mind that this is just a mundane explanation which may or may not help you in the long term.

If someone asks me about the trend, I just look at the current price of the instrument and compare it with the daily opening price of the same instrument. If the current price is above the open price, then the instrument has an upward trend.

If the current price is below the daily opening price, then the instrument has a downward trend.

Bear in mind that I took the daily opening price as the reference point because I am primarily a day trader. You can take the weekly, monthly or even the yearly opening price as the reference point in order to come to your respective outlooks about the instrument.

Upon closer inspection of the stock market prices, you can jump to a sane conclusion. Every day, there is an open price. As time progresses, the price will begin to float away from the opening price.

In other words, the price will either moves upward or downward throughout the day.

On trend-less / choppy days, the price will keep on making newer highs and lows throughout the trading period.

The beauty about taking into account of the opening price as the reference point is simple. This is the only price that remains the same throughout the trading period. However, the high / low / close price can keep on varying throughout the day.

Trying to take trading decisions based on these variables (high /low /close) will put your trading career in jeopardy. Focus on the factor that is constant every day. That is the opening price.

Once the market starts, they cant change the opening price. But the high / low and the closing prices will keep on changing.

Just take some time to think through all these. I am just trying to condense the intricacies of the stock market into simple and understandable terms.

Take any chart depicting any time period. Take a look at each one of the candlesticks. In every candlestick, the close price will be either above or below the opening price.

Yeah, on some days, the close price might be nearby to the open price. We call such days as choppy or trend-less.

My question to fellow traders is this – cant you use this point (the open price stays the same throughout the respective trading period) to make profits in the stock market?

Every day, the market shows the traders where to go long or to go short.

Go long above the open. Go short below the open. It cannot get simpler than this.

Once you begin to do this, trading becomes easy and less of a stressful activity.

Just think about it and let me know in the comments.


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