Stock Market Logic Series #11If you are not adding the pre-and-after-hours of trading on your chart, you don't actually see the full picture of your trading analysis.
A lot of times, the market makers will push the price on the pre/after-hours times on a light volume, and will define the true low or high of the day, where you could have gotten inside with a much better price and stop placement, so when the trading hours starts, you don't feel lost that you don't have a close risk point to put your stop at.
Also, in those outside-hours, you can clearly see a much more sensible picture where the trendlines are much more clear and it is clear what the price is doing.
Also, I don't even talk about when EARNINGS are happening... and there is a high chance for gap to happen in one direction or the other.
After a gap happens, if you only look on the trading hours, you have only the information of the first 5 min of the day so you have some estimation of what could be the high or low of the day, but looking at the pre-market you could see what are the possible true high or low of the day, which is completely different.
Also, after a gap happens, your indicators are "wrong", since they miss information.
As you go into a higher frame this becomes less important, but still... some crazy huge moves start in the pre/after-hours and the price just never comes back, it just flies to the moon. So why not position yourself at a better price with better stop placement?
The logic behind it, is that if BIG money wants a stock badly... he will buy it whenever it is possible and available before the other BIG money will snatch it from it...
Look how clear price action looks in this chart:
