Stocks & Commodities V. 23:4 (15): Q&A by Don Bright
SINCE YOU ASKED
Confused about some aspect of trading? Professional trader Don Bright of Bright Trading (www.stocktrading.com), an equity trading corporation, answers a few of your questions. To submit a question, post your question to our website at http://
Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C.
ADJUSTING ENTRY PRICES
How do you go about entering a trade after considering it for purchase the morning after your nightly analysis,
when premarket indicators look to gap sharply higher, gap sharply lower, moderately higher, moderately lower, and neutral? Do you adjust your entry price accordingly, or do you use pivot numbers?
I assume you want to attempt the best possible entry (buy) the next day. If you see an expected gap up prior to the stock opening, based on opening indications from the specialist, then I would not buy on the opening. Remember, the specialist cannot participate on the buy side when there is a gap up opening; rather, he must accommodate the excess buy orders by selling. It is never a good idea to go against the specialist. Now, if you see a gap down based on opening indications, I suggest you double-check your homework, and then participate with an opening-only order to buy. This way,
you’ll be on the same buy side as the specialist (for the reasons I mentioned).