In light of the high-frequency-trading robots, learning algorithms, and other various and sundry computer generated impediments, is there now an advantage to trading the open and/or the close?
Yes, at the open and the close the order imbalance on both sides of the trade can be traded against, and especially at the open there may not be enough liquidity to prevent a few orders from pushing the price up or down.
For institutional investors who have to fill large orders, this is not an option. But for the retail trader, maybe so.
My assumption is that the orders are able to be filled at the open/close without the robots affecting the fills. Perhaps this is erroneous.
What say you?
i have at times,pushed and pulled the bid/ask in the direction that i have needed to either buy ,and especially sell an order,and i have found that most of the time it’s the first 20 minutes of the session. worked great in 08 and 09. in those 2 yrs the hod was always at the first 20 min,and especially so in options.
drummer, I should specify that I mean trading the open using a market on open order and/or the close using market-on-close or limit-on-close.
After the opening cross, the idea is that the HFT guys take over. This may not be true, but that is what I am wondering.
I’ve seen plenty of fairly generic HFT systems that trade right on the open. Take, for instance, a simple tool like trade-ideas or cool trade. Just my opinion, but if the retail market has them, then I would guess the big boys have them in spades.
Good point Damian. However, what would be the advantage, since you are guaranteed the price of the opening cross, at the open?
Sure, one could push up the ask with buy orders with the intent of shorting the second after the open, but there is not enough liquidity to ensure that they will be able to get out of the trade before it moves against them.
There uses to be a huge edge playing order imbalances against fair value of SP500 futures. Those days are gone. The vanilla version of that strategy doesn’t pay very well anymore.
Thanks Dynamic.
Hi, Wood!
I gave up on at-the-open trades for anything that is not a big index future or ETF. For small cap, and micro cap stocks especially, there sometimes is no liquidity until 9:31 or 9:32. The spreads can be huge.
I’ve occasionally gotten bad executions on MOC orders. If my system is based on market-on-close, I avoid bad executions by submitting regular market orders at 15:59:58 or so.