Tom Carlson’s Blog Post
1. Never place market orders (ones with no specific buy/sell price) before the opening of the trading day
At the opening bell some unforeseeable things have been known to happen. You may find yourself paying much more than you intended on the buy side, or you may receive much less than you expected in terms of the sell side. This is always a risk with a market order, but it is to be taken very serious at the opening. This tends to be the case in part due to traders reacting to last night’s or the morning’s recent news. If you feel that you should trade at the opening, guard against too much loss with a limit order.
2. The best time to trade is usually in the afternoon, from about 1-2:30 p.m. EST
This is that special time of day when everyone from the east to the west coast is at work and has caught up on the daily news. Market-shaking government statistics are just about always released in the morning along with most corporate earnings reports.
3. Always check the “bid size” and the “ask size” for any exchange-listed stock before submitting a buy or sell order
A reliable real-time quote system will tell you not only the last price of a stock, but also the bid price, the ask price as well as the number of shares being bid for or offered at those prices.
When the bid size is larger than the ask size, it’s a sign of underlying demand for the stock, so it would not be wise to hold out much longer if you were planning to buy. On the other hand, a large position on the ask side suggests there are a lot of sellers eager to get out. Don’t waver if you were intending to sell.
If the bid and ask sizes are almost equal, it is an interesting situation for entering a limit order exactly halfway between the bid price and the ask price. Most likely, your order will be executed in the middle.
4. The best time of the month to buy stocks is around the 18th-22nd
Between the 18th and the 22nd of every month cash flows into the market that tends to be lower is prices. As a side note, the best time to sell stocks is during the first two and last two days of the each month. September and October are also heavy months to buy as the market has a seasonality to it where it tends to dip quite low in the two months. Set your calendar to do most of your selling in the month of April and early on in May.
5. Choose stocks to buy that are trading above $10 a share
Reason #1 Stocks below $10 are usually quoted at larger % spreads between bid and ask, so you will need a bigger price increase to break even
Reason #2 Companies with low-priced stocks are more prone to financial trouble, ie. bankruptcy.
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