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.

Some traders follow something called the "10 a.m. rule." The stock market opens for trading at 9:30 a.m., and the time between 9:30 a.m. and 10 a.m. often has significant trading volume. 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.

The "10 AM rule" in stocks suggests that it's often better to wait until after the first 10 minutes of trading before making significant trading decisions.

In simple terms the rule states that: If a trending stock makes a new high after 11:15-11:30am EST, there is a 75% chance of closing within 1% of High of day (HOD). Same applies for downtrend.

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.

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.

What is the 3 5 7 rule in trading? A risk management principle known as the “3-5-7” rule in trading advises diversifying one's financial holdings to reduce risk. The 3% rule states that you should never risk more than 3% of your whole trading capital on a single deal.

This principle says for each dollar you earn or are given, you should save 10%, share 10%, invest 10% and spend 70%. A key part of this formula is “paying yourself first” which means the first 30% of your earnings are paid to you, for your benefit … for your retirement, for emergencies, and for sharing with others.

10-2-2 is a teaching framework that advocates teachers talk for no more than ten minutes, provide students with two minutes of group processing time, and then provide two minutes of individual processing time.

The 9:20 AM short straddle strategy offers traders a dynamic approach to capturing potential profit from market volatility in the early trading hours. By selling both a call and a put option with the same strike price and expiration date, traders position themselves to profit regardless of the market's direction.

What time of day is best to buy options? ›

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 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.

The 2% rule is a risk management principle that advises investors to limit the amount of capital they risk on any single trade or investment to no more than 2% of their total trading capital. This means that if a trade goes against them, the maximum loss incurred would be 2% of their total trading capital.

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.

The 80% Rule is a Market Profile concept and strategy. If the market opens (or moves outside of the value area ) and then moves back into the value area for two consecutive 30-min-bars, then the 80% rule states that there is a high probability of completely filling the value area.

One of the golden rules of trading is to always prioritize risk management. This means determining how much you are willing to risk on each trade and setting appropriate stop-loss orders to limit potential losses.

What is the 10 AM Reversal Time? The 10 AM reversal time embodies a fascinating trend within price action. If you have been trading for a few years, you know that 30 minutes into the trading day can mark a shift in direction.

The Securities and Exchange Commisssion (SEC) is authorized under federal law to suspend trading in any stock for a period of up to 10 business days when it believes that the investing public may be at risk.

The best time of day to buy and sell shares is usually thought to be the first couple of hours of the market opening. The reason for this is that all significant market news for the day is factored into the stock price first thing in the morning.

You use the 10 A.M. rule, and wait until after 10 A.M. to buy your stocks and options. If the stocks and options make a new high for the day after 10 A.M., then, and only then, should you trade the stocks and options.