Day Trading or Night Trading -- Technical Analysis Is All About Groundhog Day


Day trading and night trading are exactly the same ... a time loop. The Market does the exact same thing every day, day in and day out, month in and month out, year in and year out. It is so repetitive, that there are actually a handful of stocks, known as Cyclicals, that perform the same way every year. Talk about Groundhog day, Morgan Stanley even offers what they call a Cyclical Index, the CYC, composed of roughly 30 stocks that perform the same each year, and big name stocks to boot -- Alcoa, Citicorp, 3M, Honeywell, Ford, Goodyear Tire, etc.

What investors may not know, however, is the Market does the exact same thing every day, intraday, as well, it cycles. There is a precise start to the cycle, a middle point, and an end. Over and over and over. In fact, buying and selling can be reduced to its simplest form, be made very simple, if you just start at the beginning of the cycle.

What we find with traders is much the same as Bill Murray. When an investor first starts buying and selling, call it "beginner's luck" or whatever, but they seem to do well. They are not burdened with all the baggage of previous losses and confusions. More importantly, they simply cannot believe that investing can be so simple. There must be some catch.

We are all taught from the time we are children that, to get ahead, you must work hard. You must do all your homework, go to college, work 8-10 hours a day, etc. Working hard = Being successful = Being rich. So when traders first begin buying and selling and suddenly having wins, they just cannot accept the fact that what their parents said for so many years was -- well putting it mildly, hogwash.

So what do they do? They complicate it. They run out and buy expensive technical analysis trading strategies, spend literally thousands of dollars on this gizmo, that widget, until their charts are so cluttered with "advice", they get nothing but mixed signals. Should I buy? This indicator said no, this one said yes.

Every few minutes they relive the same experience, should I or shouldn't I. Hmm...the last time I tried this technical analysis indicator I lost, so I better follow this other indicator. Definitely Groundhog day. To compensate for their confusions, many investors feel that more time in the chair will help. They sit in front of their computers for 8-10 hours, bell to bell. In fact, investors can make buying and selling so complex and so confusing, that eventually they find that they simply cannot pull the trigger any longer. That is the basic definition of "traders psychology": when your own self conceived psychological barriers stop you from investing at all.

The investors who are successful all go through this same Groundhog dayish pattern. They start simple, the deal with the confusions because they purchased expensive trading signals, and finally come to the realization that trading can be a very simple activity. They remove the conflicting technical analysis trading strategies, one by one, going back to the simple version of the charts. And the most important point is that they look for the start of the cycle....Bill Murray's 6:00am.

The beginning of every cycle is where the momentum lies. The direction has just turned, investors pour money in. Once the cycle has been going on for a while, that momentum wanes. And by the end of the cycle, there is no momentum. So the clever investor identifies the start of the cycle, gets in and gets out fast, and lets the rest of the herd flounder in confusion. The key to being successful day trading or night trading is to understand the Markets secrets, find the beginning of each cycle, and buy and sell quickly.

What time is best for night trading after hours? It all depends where you live in the world. If you are trading the Futures Market, there is always a futures contract to trade that is considered to be night trading.

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