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Better avoid placing market orders on Monday morning on Wall Street !
Friday 11 September 2015
Some useful advice – to protect yourself. If there is any period during the week in the market, which you should avoid, then it is the opening of Wall Street on Monday mornings. There are good reasons for this.
During weekends private investors finally have the time to deal with their personal affairs and to sort out their investments. This is not the case during the working week, due lack of time to attend to this.
The investor is inundated by the media: TV talk shows and especially the Sunday newspapers. This influence should not be underestimated in the way it affects the private investor. The result is often a real flood of optimistic or negative opinions on prevailing issues and shares. These are then reflected in the buy or sell orders on opening of trading on Monday morning.
Due to the different time zones, first the Asian investors and then the European investors will place their orders. This results in a tsunami of orders accumulated over the weekend to be executed on opening of the New York stock exchange on Monday morning, or in the afternoon for the European time zone.
Brokers on Wall Street specialize in exploiting this "Weekend wave of orders". They observe the order flow coming in on Saturday, Sunday and Monday (European time). The majority of orders from investors are placed at the Market - without Limit prices.
Brokers can then bundle the buy and sell orders. If there was a lot positive or bullish news during the weekend then the opening prices will reflect that with higher prices. A few hours later, in the course of Monday in the US, the upward momentum of prices may have fizzled out. Here is where the smart broker tries to benefit from the trend.
The reverse also applies when "panic-News" dominates the weekend in the media. At the opening bell, the bundled sell orders at the market, without limit , will drop or even gap down in price from the last closing quotation of the week before. A bit later on, when calm prevails and the storm clouds are gone. The "Weekend amateurs" will have experienced a financial 'haircut'.
It has been my experience that Monday morning at the opening bell, is not the time to place orders on the New York stock exchange. Just wait and see how the prices move over the course of the day. You can then place your buy or sell orders to be executed. So not before 17:00 German time. - Sounds like a condensed piece of advice, but it has often paid off.