When the Opening Bell rings in New York at 9:30am EDT, there is normally a large spike in volume that can propel the market upward or downward. If you are on the right side of the market, there can be an opportunity to pick up 20 ticks or better as the market rises or falls over the short term.
After the first 20 minutes of trading, the initial rally can stall, triggering a reversal. As a general rule,I pay close attention to the market at 9:50am to gauge if the rally will continue, or whether a reversal is imminent.
On Thursday, May 25, the decision was made to scalp the Opening Bell on the US Tech 100 Index. The plan was to wait 5 minutes after the Opening Bell and BUY or SELL based on the direction of the 9:30 5-minute candlestick, with a 20-tick take profit goal.
The following Trade was placed at 9:35am:
SELL US Tech 100 (Jun) 5710.0 – 5750.0: This is a 400 tick spread, where each tick equals $1.00, per contract traded.
Entry Price: 5740.5
Maximum Risk: $95 Maximum Reward: $305, per contract traded
Mental Take Profit: 20 Ticks, or $20, per contract traded
Mental Stop/Loss: 20 Ticks, or -$20, per contract traded
Within 10 minutes after placing the trade, the take profit target was hit, and the trade was exited for a 24 tick profit, or $24 (exchange fees not included).
But why not just let the trade run?
The market opened on a downtrend against a prevailing uptrend over the past several days. I entered the trade with the idea of scalping the Opening Bell momentum.
Here’s what would have happened if I stayed in my SELL trade:
The market turned around and kept rallying upward for the rest of the day for more than a 400 tick move to the upside.
If you were a buyer after the Opening Bell dip, there were plenty of opportunities to trade binary options and spreads.
Note: Exchange Fees not included in Calculations