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. https://www.fxcm.my/ 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 stock, for whatever reason; a trend play, or a market rally that you think a currently hot sector will participate in.
Sometimes it`s wise not to be the early bird when investing in forex, instead wait and see what the day will bring before you take action. This rule protects your capital and can be a good example. You want to purchase a forex stock for any reason, whether it is a trend-play or you believe a hot sector will be part of a rally. 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. The gap up trade is not a good one. Now what do you do?
The 10 A.M. Rule is used to determine the best time for investing in forex stocks. You should only trade if the forex stock reaches a new daily high after 10 A.M. Of course, you will use stops to protect yourself, like you would on any 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. By following the 10 A.M. rule, you avoid the risk of this sudden reversal. 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. At 2 P.M., it hits $166.50. Using the rule of 10 AM, it is safe to purchase forex stocks.
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 forex stock investing trades you make with a high probability of success, the more successful you will be. The 10 A.M. rule is a valuable addition to your trading plan, giving you a straightforward way to avoid making costly mistakes and to increase your number of profitable stock investing trades in forex.