The 10 am Rule: A Millionaire’s Secret for Trading Stocks and Options (2024)

FAQs

What is the 10am rule in the stock market? ›

Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour. For example, if a stock closed at $40 the previous day, opened at $42 the next, and reached $43 by 10 a.m., this would indicate that the stock is likely to remain above $42 by market close.

The early morning market is typically characterized by volatility as it reacts to overnight news, early trades and market sentiments. By waiting until 10 a.m., traders can assess the market's direction more accurately, making more informed decisions.

Rule 1: Always Use a Trading Plan

You need a trading plan because it can assist you with making coherent trading decisions and define the boundaries of your optimal trade. A decent trading plan will assist you with avoiding making passionate decisions without giving it much thought.

Avoid options with low liquidity; verify volume at specific strike prices. calls grant the right to buy, while puts grant the right to sell an asset before expiration. Utilise different strategies based on market conditions; explore various options trading approaches.

Many professional traders trade actively in the first hour or two of trading and take the middle of the day off. This is the best time of the day for trading options for experienced and skillful traders.

The History of the 11am Rule

Before the advent of electronic trading, stock prices were updated every hour on the ticker tape. This meant that traders had to wait until 11 am to get the latest price information. As a result, many traders would make their trading decisions based on the price movements they saw at 11 am.

One of the ways beginners can implement the most profitable trading strategies effectively is by embracing the buy-and-hold strategy. This involves researching companies with solid fundamentals and stable earnings, then holding their stocks for a long time without being swayed by short-term market fluctuations.

If you're looking for a high win rate trading strategy, the Triple RSI Trading System is definitely worth checking out. This system uses three different Relative Strength Index (RSI) indicators to identify potential buy and sell signals in the market.

A simple method which doesn't require any analysis or indicator: Open a trade in the direction of the daily candle any time during the day in your own time zone. Don't put a limit. Put a stoploss equal to the length of the candle.

Let profits run and cut losses short Stop losses should never be moved away from the market. Be disciplined with yourself, when your stop loss level is touched, get out. If a trade is proving profitable, don't be afraid to track the market.

What is the 5-3-1 rule in trading? ›

The numbers five, three, and one stand for: Five currency pairs to learn and trade. Three strategies to become an expert on and use with your trades. One time to trade, the same time every day.

Understanding the Rule of 90

According to this rule, 90% of novice traders will experience significant losses within their first 90 days of trading, ultimately wiping out 90% of their initial capital.

Options traders can profit by being option buyers or option writers. Options allow for potential profit during volatile times, regardless of which direction the market is moving. This is possible because options can be traded in anticipation of market appreciation or depreciation.

The option sellers stand a greater risk of losses when there is heavy movement in the market. So, if you have sold options, then always try to hedge your position to avoid such losses. For example, if you have sold at the money calls/puts, then try to buy far out of the money calls/puts to hedge your position.

Understand the Leverage Well

You can buy and sell options with relatively lower risk because you do not need to actually own the stock. Thus, by putting a smaller amount (option premium)- you get exposure to a significantly higher contract exposure. This is known as leverage.

The New York Stock Exchange rule permitting member firms (brokers) to vote in favor of management ten days or less before the meeting, provided that the member firm mailed proxy material to beneficial owners at least 15 business days before the meeting.

10:00am: If the trend that began at 9:30am is still happening, it will often be challenged around this time. This tends to be another time where there is a significant reversal or pullback.

You can do a quick analysis, adjust your trading strategy and get into a good position well after the crowd pulls the trigger on a gap play. Here is how. Let the index/stock trade for the first fifteen minutes and then use the high and low of this “fifteen minute range” as support and resistance levels.

The easiest way to do it is with the 90/10 rule. It goes like this: 90% of your contributions go to safe, boring investments like low-cost total stock market index funds. The remaining 10% is yours to play with.