When you first start day trading, it is easy to see stocks moving vigorously right after the morning opening and think, “I want to catch that movement again.” However, after 10:00 AM, even if you look for similar patterns, for some reason, things often don’t go well. In this article, we will organize the reasons why the nature of the market changes depending on the time of day and consider, for beginners, how to approach the market after 10:00 AM.
Why morning movements tend to be larger
The Tokyo market opens at 9:00 AM. Because information such as domestic and international news, overseas market movements, and financial results has accumulated overnight since the previous day’s closing price, people who want to sell and people who want to buy place orders all at once at the time of the opening. Because orders are concentrated, prices are prone to moving significantly.
Immediately after the opening, trading volume also tends to swell. Price movements are large, and there are many participants. Because it is easy to get results in a short time, it is a time zone that is easy to focus on as an entry point for day trading.
As time passes, the reasons for movement decrease
On the other hand, many of the reasons for the morning movement are incorporated into the price as time passes. Reactions to materials from the previous day are often mostly exhausted within the first 30 minutes to an hour. After that, unless new materials appear, the reasons for movement themselves decrease.
As a result, from around 10:00 AM, price movements tend to calm down, and trading volume also tends to decrease. Of course, there are exceptions depending on the day. If news that moves the entire market comes out, it will move significantly even in the late morning hours. However, as a general trend, the momentum is likely to weaken compared to the morning.
Even if it looks like the “same pattern,” the content is different
What beginners often stumble over is reacting to chart patterns that look the same. If an upward pattern that worked in the morning appears after 10:00 AM, you will want to target it in the same way.
However, even if the pattern is the same, the number of participants and the volume of orders in the background are different. The morning rise was supported by the orders of many participants. The same pattern after 10:00 AM may be created by the orders of few participants. A rise with thin orders is easily collapsed by a little selling. You need to look not just at the appearance, but also at the trading volume and the depth of the order book.
An environment where false signals are more likely to increase
When the reasons for movement decrease, price movements easily lose their sense of direction. Even if it looks like it has broken through to the upside, it immediately returns. Even if it looks like it has broken through to the downside, it immediately returns. Such movements are called false signals (whipsaws).
When there is morning momentum, it often continues to move in the direction it once broke. However, as time passes, there are more situations where it does not continue even if it breaks. Even with the same judgment criteria, if the environment changes, the accuracy of the results decreases. Continuing to challenge without changing your criteria can be a cause of repeated losses.
Consider the width of the stop-loss and the width of the price movement together
When time passes and the width of price movement becomes smaller, the loss width becomes relatively large compared to the profit price width if you use the same stop-loss width as in the morning. For example, a stop-loss that was set wide because the price moved significantly in the morning becomes unreasonable if the width is the same after 10:00 AM.
As the width of price movement becomes smaller, the profit you can aim for also becomes smaller. Accordingly, you need to review your stop-loss position and trading decisions. If you cannot review them, not entering is also an option.
Thinking with a fictional scenario
The following is a fictional example to illustrate the way of thinking.
After the morning opening, a certain stock rose above the previous day’s high, and I was able to make a profit that day. After 10:00 AM, another stock is about to exceed its high in a similar pattern. It looks like the same conditions as in the morning, so I entered in the same way.
However, it did not grow immediately after I bought it, and after moving sideways, it began to fall slowly. The trading volume was clearly lower than in the morning, and the order book was thin. The distance to the stop-loss position was not far, but while I was hesitating in my judgment, the loss expanded.
There was a reason for the movement in the morning. By this time of day, that reason had weakened. Even if the pattern looked the same, the underlying context was different.
How to spend your time after 10:00 AM
So, is it better to do nothing after 10:00 AM? Not necessarily. However, it is important not to have the same expectations as you did in the morning.
One approach is to increase the number of times you choose to sit out. If the conditions are ambiguous, don’t enter. Adopting a stricter set of criteria than you use in the morning is a natural adjustment. Another approach is to use this time for observation. Look back at the morning’s movements to confirm what was effective. Alternatively, look for stocks that might move toward the afternoon. Time spent not trading is also a part of day trading.
Also, there are times when the market atmosphere changes in preparation for the lunch break or the afternoon session. If you view the late morning as an intermediate period before that transition, it becomes easier to adjust your expectations.
Know your own trading time zones
Ultimately, it is important to know how you perform in different time zones. It is not uncommon for people to win in the morning but have their losses concentrated after 10:00 AM. If you break down your records by time zone, you can identify your strengths and weaknesses.
Sometimes, simply avoiding your weak time zones can stabilize your performance. Rather than increasing the number of trades, focusing on your strong time zones is often a more realistic improvement strategy. The trends written here are general theories, and it is a prerequisite to verify them with your own records. The more you verify, the more your own way of utilizing time zones will solidify.
Summary
The Tokyo market tends to move easily in the morning, and the reasons for movement decrease as time progresses. If you target the same patterns with the same expectations after 10:00 AM as you did in the morning, you are likely to get caught in a trap because you fail to notice the difference in context.
The important thing is not to maintain the same perspective as in the morning. Recognize that the nature of the market differs by time zone, and use sitting out or observing as part of your strategy. By doing so, you can reduce forced trades and maintain the quality of your decision-making.
The experience of having a successful morning is a valuable lesson in itself. However, it is equally important not to carry that success directly into other time zones. I want to have the awareness to use different approaches after understanding the characteristics of each time zone.
Note: This article is intended for general information and sharing market perspectives, and does not recommend buying or selling any specific stocks. Please make investment decisions at your own responsibility.
