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After Hours Stock Trading Using Candlestick Analysis
When should I participate in after hours stock trading? The steps below may help in addressing that question.
First and most importantly, do you have a target price and stop loss strategy? If the answer to this is "no", go no further. Does your trading plan allow you to hold positions after hours? If the answer to this is no, then any changes to an overall trading plan should be made preferably at month's end or perhaps over the weekend, and certainly not while contemplating a trade or with the intention of influencing a current position. The stock trading plan should be changed from a position of objectivity and not haphazardly on the fly.
Is the position too large to modify via after hours stock trading? Based on maximum potential risk on a given trade or on a given day? Based on margin rules? Of course, scaling back to a smaller size and closing a portion of the position is definitely a possibility to improve your stock market results.
However, say that after addressing the items mentioned above, there are no such constraints. What do you consider to be the real issue regarding after hours stock trading? It is the potential gap down or gap up, possibly event driven or news driven from stock market newsletters, which you may face early the next day. It's the gap against you that you have limited control over. Once the market is open, you have plenty of candlestick gap analysis techniques to help you decide what to do.
To try to avoid significant gaps against you, the after hours stock trading segment of your overall stock market investing strategy may include a rule not to hold short or long positions into a major press release or scheduled conference, or over earnings announcements. The same is true for major economic reports, Federal Reserve Board speeches, etc. Also consider whether you will hold over option expirations in accordance with your stock option trading strategies, whether you will hold over holidays or weekends, and consider any other events that might trigger automatically closing a position.
Also, remember it's not the news, but the perception of the news by the stock market community that matters.
Based on the pattern of the indices, are we likely to open down, up, or flat? Based on the current daily candlestick chart patterns in this stock are we likely to gap down, up, or open flat? Where will the gap against you land you from the standpoint of resistance or support? How close is the primary target? Have you made money in this trade yet? What about the moving averages on various multiple time frame trading charts? It is a good idea to consider all of these questions when considering after hours stock trading. Of course there is no perfect answer. But you must ask all of these questions to remain focused!