Trading the Close
Three Key Strategies for Trading at Market Close
Why Trade the Close?
Trading the close offers unique advantages. The market can often quickly pull back to a mean or set up for a multi-day run due to potential urgency. However, as with any trading strategy, preparation is key. Calibrate yourself to current market conditions, review your plan, screen for opportunities, and ensure no distractions.
Strategy 1: Scalping The Last 15 Minutes
On a big trend day, the final 15 minutes is often a rush to get the last of the orders done. The aim of this strategy is to trade the direction of the trend to capitalize on price urgency.
However, this strategy isn’t for everyday use. It works best when your chosen market is in a trend/reprice scenario and trading in the lower 20% of the day’s trading range. Key triggers can include break and retest, classic breakout, or resistance/support pin bar.
Strategy 2: VWAP Magnet
During range bound rotational days, the Volume Weighted Average Price (VWAP) often acts as a magnet, pulling any price extensions back towards it. This strategy tends to work best in thicker markets like the indices, large ETFs, or large-cap stocks.
Reversal type patterns when price is away from VWAP can serve as trade triggers. The goal here is trading back in the direction of the VWAP, with the target being the VWAP itself.
Strategy 3: Overnight Follow Through
Broader higher timeframe patterns often start or are confirmed in the closing session intraday. For instance, a daily bull flag finally breaking out into the close potentially sets up a 1 – 3-day move.
Scan your basket of markets for daily chart patterns and aim to catch these as early as possible if they trigger in the final hour of the day. Triggers are usually price level breaks, and stops should be tight initially until the close, considering the overnight risk element.
Wrapping Up
The close can be a good time to trade if conditions are right. Use the close as an early lever to position for a broader move, think about the conditions, and manage your risk carefully. Remember, trading is like playing chess; think about the next 5 moves, position yourself accordingly, and the advantage could be yours.