Trading is Not About Prediction

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After-Hours Trading — Everything You Need to Know

When it comes to trading, there is a lot to know, and one of the important topics is the trading time. What time is best? And during what time can you trade at all? When you are just starting, this is one of the topics that take a bit more time to learn about. Experienced traders do not hesitate to investigate the market and the asset they are about to trade before investing in it.

Of course, there is a difference among the instruments on the platform. Some markets are open 24\7. It means that you can trade them all week long without any limitations. It is convenient to trade markets that are open all day every day, like the crypto market. You can place deals there at any moment, including the weekends, too. Moreover, it is possible to close the deal whenever you like, without the need to wait.

However, with CFD assets, it is a bit different. Stocks are traded according to the market hours. Let us look at it a bit more closely and learn everything there is about trading time of stocks.

Market hours

When the time comes to trade a certain CFD asset, you may open the traderoom and suddenly notice that the asset is closed. Why does it happen?

Each asset has its own trading time at which the market is open. If the market for a certain stock is closed, you will see the time left until opening in the traderoom:

This timeframe shows exactly how much time is left until you can trade the asset again. If you have an already open position on this asset, you will see it in your portfolio, however, it is not possible to close such deal until the market opens. You cannot sell or buy an asset that is not traded at the moment. However, as soon as this time is up, you are welcome to open new deals or close the ones you already have, if you wish so.

Besides checking in the traderoom, it is always possible to check the schedules, as they are available on the website. Let us have a closer look at the schedule.

Here you may find the information about trading time as well as overnight fees and spread.

Note that the schedule is according to the UTC +3 timezone. The schedule allows you to plan your trading strategy beforehand and take the trading time of assets into consideration.

You may decide how long you wish you leave your deals open for, count the overnight fees you will be charged and calculate the risks. If you prefer trading stocks, plan your trading in accordance to the market so that you are never caught off guard. However, if you notice that the asset is closed, but you still wish to trade it, there are options for you that we will talk about next.

After market trading

While the stock market is open at certain hours during business days, the value of the stock is still changing and fluctuating all the time. It happens as there is a certain company or business behind each stock. The company releases news and announces changes and it will immediately influence the intrinsic value of the stock. Some companies report earnings before the market opens or after it closes. Traders and investors want to access the market when the intrinsic value is changing and that is how the pre-market hours trading and after market trading are born.

Pre-market trading takes place approximately an hour before the stock market opens and the after hours are usually 2-3 hours after the market closes.

It is needless to say that it is specifically important to closely follow the news of a certain company which stocks you are trading. Even minor announcements can significantly influence the market, and that it is why it could be useful to focus the attention on 2-3 assets, rather then trading dozens of them without taking time to learn about the business.

As the trading type of IQ Option platform is CFD (contract for difference), traders invest making an expectation about price change and benefit from a correct prediction or lose if the prediction was incorrect. While the market is closed, it is not possible to trade the asset. However, there is a possibility to schedule a deal for it to open automatically once the market opens. Let us have a closer look at the way it works.

Market-on-open” feature

After the market closes, the after market trading takes place. How can traders of IQ Option benefit from it?

It is possible to schedule your deals exactly how you want them to open. There are two ways to place orders even when the market is closed. The first one is placing a “Market-on-open” order. It means that the deal will be opened once the market for this certain stock opens.
Let us look at an example:

The market for Apple will open approximately in 5 hours. Let us imagine that you are about to place a market-on-open order:

  1. By evaluating the stock’s previous performance and the news releases you need to decide whether the price of the asset will continue dropping or reverse and start rising once the market opens.
  2. Click “Buy” if you think that the price will rise or “Sell” if you estimate further decreasing of the price. Make sure that you have set it “at opening”.
  3. Once you have clicked “Buy” or “Sell”, a deferred order will be created. It will be triggered and executed as soon as the market opens.
  4. You can easily check all of your pending orders in the total portfolio.

This feature is useful for traders that want to enter deals immediately once the market opens. It is an extremely useful possibility, however, it can also be quite risky, as there are no quotes up until the moment of the market opening. Moreover, assets that are not traded during weekends can open at a drastically different price on Monday. Therefore all decisions are made according to your knowledge of the market. Once the market opens, it can also take time for the price to settle so your prediction has to be well-weighted.

“Purchase at..” feature

Our platform offers traders high flexibility, so the “market-on-open” feature is not the only one that can be used. Deferred orders are quite handy when it comes to after market trading. If you estimate a certain change in price and you wish to enter deals exactly at established levels, you can set the quote when opening a pending order. Let us see how it can be used.

To create a pending order that will be executed when the price reaches a certain quote, simply click on the “at opening” button and change the price to a certain level.

The pending order will be triggered and the deal will be opened as soon as the market opens and the price reaches your set level. This feature is useful as it allows you to control what level your deal will be opened at exactly.

How to evaluate stocks

As there are many possibilities for traders to place deals even when the market is closed, it is important to understand the asset that you are trading and gather as much data as possible before opening deals. On the platform you can find a useful feature that keeps all crucial data in one place.

When the market is closed, you have more time to make your decisions and it is wise to pay more attention to the information about the asset you invest in. On the platform you can use the “Market Analysis” tab to read about different assets, but you can also focus on the one that you are about to trade.

To see all the useful data in one place, click on the “Info” button near the asset name.

In the tab you will find everything you need to know in order to make an educated decision.

Here you will see the trader’s sentiment which reflects the percentage of traders choosing one or another direction, as well as market news about the specific stock you have chosen, earnings calendar and trading conditions. The trading schedule can also be found there, for your convenience.

Trading stocks can be rewarding, however, there is a lot to take into consideration before you start. You may use the practice account to see how the overnight fees are applied and test different investment amounts. Moreover, the practice account is a good place to exercise placing deferred orders during the after market hours.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.

GENERAL RISK WARNING

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
87% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Quick Lesson — What Most New traders Don’t Get About Probabilities

As I sit back and reflect on my journey as a trader, where I was and where I am today, I can clearly point out the things I didn’t get right at first. For instance, one of the fundamental lessons that I’ve learned and come to accept is that certainty in the market is an illusion.

The analyses, all they tell you is that something is likely to happen. But likely, doesn’t mean a sure thing.

Here’s an analogy that is often used: If I flip a coin that’s slightly more weighted on the tails side, I know how the outcome will shape up in the long-run. (overall it’ll land more on the tails side). But in the short-term, there will be a lot of noise – the coin will land on both heads and tails, often in streaks.

If you haven’t noticed, that’s precisely what trading is, and that’s why strategic money management is paramount! No matter how extraordinary your market edge is, if you place all your hopes and dreams on any individual trade and start betting the farm, at some point, you are going to be disappointed.

Now, this ‘not knowing how things will turn out in the short term’ has led many traders (even seasoned ones) to fear the term ‘prediction,’ or, ‘forecasting.’ My take on this is this: the moment you place a trade with a directional bias, you are, in effect, predicting/forecasting/anticipating.

The human brain is a fascinating “device” that’s really good at that, though it might not seem like it. Our thoughts are regurgitations of past events/experiences/reactions streamed into our mind in the present. Our brain does that because it’s constantly attempting to use those experiences in some way –consciously or unconsciously — to predict the future (which also appears as thoughts).

  • You don’t put your hand on a hot stove because your mind predicts that if you do it, you will get hurt (based on past learnings.)
  • You pack a snack before heading to work, even though you’re not hungry because your mind predicts that later in the day, you’ll get hungry.
  • When driving, you put your seatbelt on in anticipation of some future unfortunate event.

As you see, we do predictions/ forecasting/ anticipations all the time, and stacking trading and “I don’t do predictions, I just react” in one sentence is just nonsensical. Reaction is prediction.

Really, it’s not predicting/forecasting that’s an issue. It’s our expectations that are not aligned with some basic probabilistic facts.

  • The sun will rise tomorrow. This is not an absolute certainty. But based on what we know about science and the laws that govern this universe, this is a very (very) high probability. And so, having a high expectation that the sun will rise tomorrow wouldn’t be out of line.
  • You won’t win the lottery in your lifetime. Your odds of winning the Mega Millions jackpot are 1 in more than 302 million. Having a high expectation that you will win it someday is just a very poor allocation of your brain resources.
  • If you live in the U.S.A, you won’t die of Malaria. Again, basic probabilistic fact. Now, if you live in Africa, the likelihood of you contracting the disease goes up a bit. And the closer you live to the regions that are affected, the higher the possibility of you contracting it.

So you see, everything about our lives is a matter of probability — at the macro level, at the micro level — existence itself is a game of probability. And what plagues the typical trader is a poor understanding of his probabilities in trading.

The reason…

We usually have high degrees of control in many areas of our lives – in the material world.

  • You need something to eat? Just head to the grocery store.
  • Inconvenient weather conditions? Cover yourself. Take an umbrella.
  • Don’t like a particular tv program? Change the channel.

The problem arises when we expect the same in trading. We’re so used to controlling things in our daily lives with high degrees successes (because the probability of successfully doing so is high) so, when we come into trading, we bring in that same kind of mindless expectation.

We place a trade, and then we expect a specific outcome. And we feel like we have to control the trade, tweak it, and constantly check it in order to make the outcome materialize as we would want it to be. But when it doesn’t happen, we feel bad; we have a hard time accepting it.

Prediction exists on a continuum ranging from low probability to high probability. And the thing with trading is that your probability of success in the short run will never be as high as it can appear to be in other areas of life. It’s just a fact. There is a lot of noise. (winners and losers come in streaks.) Chance plays a big role in this game. And it’s just something you have to learn to accept.

The true meaning of acceptance

Acceptance is the act of ‘being at peace with.’ It’s about embracing. Acceptance literally means ‘taking what is offered’. It doesn’t mean just gritting your teeth and bearing the outcome. No, it means fully opening yourself to your present reality—acknowledging how it is, right here and now, and letting go of any internal struggle.

But what if you want an outstanding trading performance and not just ‘accept it as it is’? Well, that’s the paradox: The more you accept the outcomes of your trades without resisting; the more you keep placing other trades irrespective of how your past trades made you feel, well, the more you’re letting the probabilities work their magic without interference. And the more your performance improves.

So if you can learn to understand, accept, and appreciate your probabilities, your actions will be far more effective since all the time and energy that you waste on struggling with thoughts and feelings will be invested in taking action—the right kind of action.

Profit Without Predicting the Market

Additional knowledge accumulation is not always beneficial when trading financial markets because some information can make us more ardent in our views and opinions, so we make bold predictions that turn out wrong. And incorrect predictions can be costly when real money is on the line, especially when we take positions against the prevailing price movement and in anticipation of a quick and sharp change in price direction, but then the reversal never happens.

Key Takeaways

  • Predicting the market is challenging because the future is inherently unpredictable.
  • Short-term traders are typically better served by waiting for confirmation that a reversal is at hand, rather than trying to predict a reversal will happen in the future.
  • Viewing price action as a series of waves is an alternative to predicting future price moves.
  • Establishing significant points to buy and sell should be based on what price is actually doing, rather than what we expect it to do.

Investors, especially short-term traders, are usually better off waiting for the movement in price to confirm a trend or reversal rather than try to predict what is going to happen next. Section two of this article looks at some ways we can rework our thinking to gain a better edge. The first section looks at the reasons why predicting can be a problem.

The Prediction Problem

  • The future is uncertain.No matter how good our analysis is, it is only as good as the information that is available right now. We cannot know for certain what will happen tomorrow. Analysis in regards to likely movement in the future is done with the idea of “all else being equal.” This means that we assume a stock will go up based on a trend if things remain as they are right now.
  • We can’t predict all contingencies.While on some days (in fact, many days) everything does remain equal, there are always days, weeks, months, or even years that defy the odds. During these times, predicting can be especially dangerous if expectations turn out incorrect. For example, predicting that something will go up when prices are falling can cripple a trader’s finances, especially since we can’t know for sure how the market will react to further news or information that may become available. When prices are falling, even good news may not push prices substantially higher, and when prices are rising, even bad news won’t necessarily have a long-term negative effect on price.
  • If the overall market moves higher, this does not mean a stock will also move higher.Analysis of individual securities is often based on the sentiment of the overall market. This can mean a trader expects one stock to rise because the market is rising, or vice versa. This does not always occur, especially in shorter time frames. Unfortunately, an alternative scenario also occurs where a trader expects one stock to outperform while the rest of the market continues to fall. Traders must be aware of market dynamics as well as individual stock dynamics. Either way, the end result is that we want to be trading in the direction of current cash flows, not against them, whether it be in the overall market or individual securities.
  • Predicting that a particular stock should move higher is vague, and the investment decision will rarely include a profit or stop-loss exit point.While not always the case, inexperienced traders predict that their equity positions will rise and assume that they will be able to get out near the top if they are correct. In reality, such a vague plan rarely works out. Therefore, all traders must have a plan for how they will enter and exit a trade, whether the trade results in a profit or a loss.
  • The holding time for stocks has decreased along with increasing volatility.Stock market volatility has increased over the years, while the holding period for securities has fallen off. Buying and holding is still a viable strategy if the method is well-devised (as with any trading method), but due to limited capital, buy-and-hold investors must be aware that volatility can reach very high levels and must be prepared to wait out such periods. Active traders trading on shorter time frames should trade in the direction of price movements given that volatility has increased, and even short-term moves can sustain overbought or oversold levels for extended periods of time.
  • Statistically, prices rarely move in straight lines for long.Predictions are often based on strong emotional feelings—the stronger the feeling, the stronger the trader may expect the price reaction to be. Thus, the trader assumes that the stock will fly in the anticipated direction in a straight movement, leading to large profits. When we look at all the securities in the world and then factor in time variables, having a position right before a major move is very unlikely, statistically speaking. Traders are far better off trading the averages and trading in the direction of price movements to gain profits as opposed to looking for one trade or stock that rises aggressively in their favor in a short period of time.

Alternatives to Prediction

Given that we now understand trying to predict a turning point in the market can be very costly, one asks, “If I can’t predict, how do I make money?”

Whether attempting to predict the market or not, generating consistent profits from short-term trading is exceedingly difficult, even for the most experienced investor.

The answer is that we follow the price, and we can do so by following the guidelines below. This is not an exhaustive list of market dynamics, but understanding these should help traders find themselves more on the right side of the trade than on the wrong side.

  • Prices fluctuate in waves.Looking at any chart after understanding the points above, all traders must understand that prices move in waves on all time frames. This means that, even though prices may fall, traders don’t need to panic and jump out of positions as long as the longer trend is still up. However, they still should have an exit point in case prices are no longer in an upward trend in their time frame. Short-term traders can participate in each of these waves but must remain nimble and not be tied to one direction when doing so. To predict that prices will move in only one direction is to disregard the factual tenet that prices move in waves.
  • Don’t assume support or resistance will hold.A very common misconception is that support or resistance will hold, or that a break of these levels will cause a substantial breakout. The position traders have often determines what they predict will occur. What traders need to realize is that support and resistance levels are simply important price areas. Making assumptions that a breakout will occur or that a level will hold off a further move is an attempt to predict the market. Rather, traders should watch what occurs around these levels and then enter as momentum moves in one direction or the other. If resistance holds and prices retreat, then a short position could be entered, for example. If a breakout occurs, then trade in in the direction of the breakout. Keep in mind, false breakouts occur, and (to repeat) prices move in waves. Don’t be tied to a position simply because a position showed a profit for a time.

It is better to think of support and resistance as pivot points for price and areas to look for entries and exits. By doing so, we are not predicting that something will occur or going against the prevailing price movement. Instead, we enter into the current price flow. This makes trading “matter of fact” as opposed to emotional. We have picked out important levels that will help us isolate the price waves a market is moving in. Then we can take a corresponding position as prices react at these levels.

The Bottom Line

Predicting the markets can be dangerous and, ultimately, predictions are not needed in order to make money trading. By realizing that prices move in waves and that we should not predict whether important levels will hold or be broken, we can enter trades at significant points but in reaction to what price is actually doing and not what we expect it to do. Traders benefit by remaining nimble in their positions and not being tied to a particular direction because of a prediction.

Why trading is profitable for you

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