The traps of the first hour of the session

Many beginner traders too hastily engage in trading during the first hour of the session, unaware of its specifics.

• Slippage: For example, you plan to buy 100 shares at 20 PLN each, but due to a rapid price movement, you end up buying at 21 PLN, resulting in an additional cost of 100 PLN.
• False breakouts: You see a dynamic breakout and buy shares, but the price quickly returns to the previous level, resulting in a loss.
• Lack of direction: You enter the market without a clear trend, leading to unpredictable outcomes. Example: you buy shares for 5000 PLN and shortly after sell for 4900 PLN, losing 100 PLN.

The first hour of the session is characterized by high volatility caused by reactions to news that emerged after the previous session closed.

• Slippage and widened spreads can significantly impact transaction costs.
• False breakouts attract traders, but the lack of trend confirmation leads to unfavorable decisions.
• Lack of direction can result in chaotic trading and hasty decisions.

Assume you have a capital of 15,000 PLN.

• Slippage when buying shares for 10,000 PLN at an unfavorable rate can incur an additional cost of 2%, which is 200 PLN.
• A false breakout when buying shares for 5,000 PLN can result in a loss of 3%, which is 150 PLN.
• Lack of direction and quick selling with a small loss of 1% will reduce the capital by another 50 PLN.
  Total losses can amount to 400 PLN one morning, which constitutes 2.67% of the total capital.

To minimize risk:

• Avoid trading in the first hour of the session if you are not an experienced trader.
• Set clear entry and exit levels before starting a trade.
• Use stop-loss orders to limit potential losses.
• Monitor the spread and avoid trading when it is exceptionally wide.
• Focus on trend analysis from the perspective of the entire day, not just the initial minutes.

Avoid making trading decisions during the first hour of the session, observing the market and analyzing the direction and volatility of prices.