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

FAQs

The 10 am Rule: A Millionaire’s Secret for Trading Stocks and Options? ›

The 10 a.m. rule in stock trading is a strategy suggesting that traders should wait until around 10 a.m. before making significant trading decisions. The rationale behind this rule is to allow the market to stabilize after the initial flurry of activity that follows its opening.

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 10am rule is an investment strategy used by traders to avoid the volatility of the market's opening hour. By waiting until 10am, traders hope to gain a clearer picture of the market's direction, thus making more informed trading decisions.

​The 11 am rule suggests that if a market makes a new intraday high for the day between 11:15 am and 11:30 am EST, then it's said to be very likely that the market will end the day near its high.

The 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.

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.

A buy signal is given when price exceeds the high of the 15 minute range after an up gap. A sell signal is given when price moves below the low of the 15 minute range after a down gap. It's a simple technique that works like a charm in many cases.

If a stock opens close to the stop but not below it and trades down through the stop within the first 5 minutes of trade, then we use the “5 minute rule”. Again, we are not out of the position on the original stop, but rather will let the stock trade for a full 5 minutes (until 9:35am EST) before taking any action.

A positive reward:risk ratio such as 2:1 would dictate that your potential profit is larger than any potential loss, meaning that even if you suffer a losing trade, you only need one winning trade to make you a net profit.

The 3-Day Rule in stock trading refers to the settlement rule that requires the finalization of a transaction within three business days after the trade date. This rule impacts how payments and orders are processed, requiring traders to have funds or credit in their accounts to cover purchases by the settlement date.

What is the golden rule of traders? ›

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.

The Rule. If, after trading outside the Value Area, we then trade back into the Value Area (VA) and the market closes inside the VA in one of the 30 minute brackets then there is an 80% chance that the market will trade back to the other side of the VA.

It is a high-stakes game where many are lured by the promise of quick riches but ultimately face harsh realities. One of the harsh realities of trading is the “Rule of 90,” which suggests that 90% of new traders lose 90% of their starting capital within 90 days of their first trade.

Whether you wake up every morning in an anxiety-driven frenzy or a sleep-deprived stupor, weblog LifeClever suggests de-stressing your mornings and getting more done by setting your watch to beep every night at 10 o'clock (or whatever time works for you), then getting started preparing for tomorrow.

So, let's talk about taking on risk responsibly. So, when you're ready to invest, you want to implement something I call the 10% Risk Rule. And this basically is just limiting your risky investments to no more than 10% of the total money you have invested.

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.

Q: How does the wash sale rule work? If you sell a security at a loss and buy the same or a substantially identical security within 30 calendar days before or after the sale, you won't be able to take a loss for that security on your current-year tax return.