Comments on First Hour Volatility

I think it is important for all traders to keep in mind that the first hour is always quite volatile. The reason for this volatility includes repositioning by many traders from overnight as well as digestion of economic and corporate premarket news. Mini "panics" often occur as well as the volatility tends to shake out unprepared traders. In addition, since the first hour tends to "set the tone" for the rest of the day, it is also used as a tool for manipulation by institutional traders. For example "pump and dump" and "dump and pump" schemes generally occur during this hour (for purposes of accumulation or distribution). Many traders will simply avoid trading at this time due to the lack of visibility and trending. Although great opportunities can be had, I generally recommend avoiding the fray, and only trade when there is a good amount of evidence to support your position.