“Amateurs buy at open, professionals buy at close”
This is a wisdom that stock market investors should pay attention to. It is a price action that can be observed in the market; it offers plenty of clues about market sentiment at the moment. It fairly tells what stock market professionals are doing. If professionals buy, follow closely; if professionals sell, keep eyes on exit at all times.
Daily price action
Trading days that open high and close higher end on a positive note. Everyone who bought that day is a winner. Trading days that open high close low end on a negative note. Buying did not follow through so there are many losers.
How did the saying ‘amateurs buy at open, professionals buy at close come about”?
It is observed that stock market amateurs rush to buy at open following overnight bullishness in other markets. They are driven by fear of missing out a rally. Professionals on the other hand are more concerned about the risk of carrying a position forward. They therefore buy (commit to a position) at or near to close.
Open high close low sign of professionals selling when going is good
Black days driven by professional selling; ominous sign
Trading days that open high close low in an uptrend are worrying. It is a sign that professionals are behind selling, not buying.
Combined with topping price action or price approaching resistance, signs from the Straits Times Index suggests that 1) stock market professionals are selling on days when price is good, 2) amateurs are left holding the bag and 3) if price turns down, the market could be full of weak players.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
Soh Tiong Hum is a member and regular speaker at Technical Analysts Society Singapore events and has a bi-monthly lunch time event at IG Singapore on forex and stock markets. He is an avid blogger on technical analysis topics; his Twitter account @sohtionghum
was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015
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