How Significant is Extended Session for Daytraders?

[indra.juwono 10]

Dear friends,

 

I have a question that have been bothering me for quite some time. Is it important for stock daytrader to put on the extended session/pre market activities on their chart? I've noticed that indicator's readings differ quite significantly when I put on the extended session on my chart. Will it improve the indicator's accuracy or will it distort it's accuracy?

 

thank you

[zapisy 10]

I would say that if you use volume indicators, then there is difference, since sometimes there are "swaps" of huge order before the market opens, and this is not important for day trader and may influence the volume indicators.

 

In terms of price? Probably most people do not use the extended chart, so I think, that it may be better for indicators to start with normal chart, also because there are orders before the market with huge spread, so the price mostly is jumpy and will destroy the calculations. But it is important to know the lowest and highest price of premarket.

[indra.juwono 10]

Yes, I agree that it is important to know the lowest and highest price of premarket.

 

I have been using MACD as my main entry trigger, and I noticed that most of the times the reading's differ quite significantly if I put on the premarket activities. It sometimes provide more entry signals at/near the open. What do you think about it? Do you think those signals are like thin ice and I should be more careful about them?

[zapisy 10]

Definitely! Always wait with the order at least 5 minutes, so all the crazy orders will go through, and market gets more stable.

 

BTW, never rely only on MACD. This is not enough for the entry signal.

 

I created a pool about that question - check it out here:

 

http://www.traderslaboratory.com/forums/f208/do-you-use-extended-chart-premarket-8576.html

[indra.juwono 10]

Thank you Zapisy. And no, I do not rely on MACD alone to initiate my trades. Usually I use the following rules: I waited for MACD bullish crossover below 0 line, and the the price move above simple MA50&100 within 5 time units (my timeframe is 5m). And DMI reading has to be: +DI>-DI & ADX>25. But for the last couple of months this rules didn't give me many trading signals. A friend of mine said that DMI is not suitable for daytrading. Is this really the case?