Trading is tough. The failure rate suggested by most in the industry is an estimated 90% of traders will fail in the first three months of trading their own online account. So what can a trader do to increase accuracy while reducing risk, all in the name of avoiding becoming another statistic in the trading game?

After trading 25+ years in the global markets one constant has provided consistency in my trading: the use of TIME and PRICE when trading stocks and futures.

There are key times during the day that the market provides pivot areas that lead to either accelerations or reversals in the current trend. The first thing I do is break the day market into two time segments. For the sake of keeping it simple, they will be referred to as Time Segment 1 and Time Segment 2. Time Segment 1 lasts from 8:30am – 12:30pm CDT. The second half of the day market, 12:30pm – 3:00pm CDT represents Time Segment 2.

I have a set of trading rules that I use in both segments, all based on time and price. One of the first and most important numbers that can be used when trading equities comes from the S&P Futures Index. The E-mini S&P is made up of 500 of the largest capitalization stocks and serves as a major trend indicator for traders.

Opening on Sunday evening at 5:00pm and trading around the clock with small windows of downtime, the E-mini trades virtually 24-hours a day. During the market week it closes at 3:15pm daily, and then it re-opens fifteen minutes later at 3:30 PM CT.

The key pivot I grab from the E-mini is the 3:30pm daily opening price. This is the start of the 24-hour clock and serves as a major pivot in the day market for stock traders, it is the dividing line between the bulls & bears for the next 24-hours.

As a stock trader, you must focus on leading indicators to help you “see” the trend before making a trade. If you have the direction right, the sky is the limit. I always use the stock indexes first to tell me what the true trend is. These include, but are not limited to, the E-Mini S&P, the E-mini Dow, the E-Mini NASDAQ and the German DAX Futures. I capture the opening prices of each of these markets on a half-hour time frame and compare them. Just like a dot-to-dot from when you were a child, these numbers will connect and create a big picture view of the trend.

Besides the half-hour opens, there are two key times during the day that create a “reference point” for stock traders; these times are the first half hour of Time Segments 1 & 2 (see above). The half hour times I am referring to are 8:30am – 9:00am and 12:30pm – 1:00pm. Observe these times and it will become clear how the market operates as two days in one. The first half hour controls the morning, then the volume leaves around 11:00am and the market slows down until about 12:30pm CT. The second half, or Time Segment 2, begins at 12:30pm every day. The market will typically accelerate the trend from the morning in Time Segment 2, or it will clearly reverse, as was the case on October 30, 2009. (See Charts Below).

Click on image to enlarge!

Chart 1 is a 30-minute chart of teh E-Mini S&P Futures from Oct. 30, 2009
Time Segment 1 was a short after 9:00am
Time Segment 2 was a reversal after 12:30pm.

Click on image to enlarge!

Chart 2 is a 30-Minute chart of Apple Computer on Oct 30, 2009.
Time Segment 1 mirrored the action on the E-Mini S&P Futures.
Time Segment 2 was the reversal (same as the S&P).

For more information on using TIME and PRICE in your trading to capture the trend, visit DTItrader.