a) Why first 5 minutes are very important in the stock market ?
b) Why first 5 minutes are very volatile in the stock market ?
c) Why first 5 minutes provide excellent opportunity to EXIT and not to enter ?
The answer to all of these questions is simple :-
In the first 5 minutes there comes tremendous volume from everywhere. Some wants to exit and some wants to get in to a trade. This "tremendous volume" gives the ability to a trader to ENTER or EXIT at any desired price, however this is just one part.
The first 5 minutes are EXTREMELY valuable especially when you trade in OPTIONS because the IV (Implied Volatility) is at the peak for the same reason, some wants to enter and some wants to exit. HOWEVER in case of Options, ENTRY is NOT advisable in the first 5 or 15 mintues unless something is so important and something that can't be missed.
Its not just about first 5 minutes but the same happens in the last 5 minutes too, however intensity (& IV) in last 5 minutes is not as much as it is seen in first 5 minutes. This means the first 5 minutes and the last 5 minutes remains very volatile.
The reason why the ENTRY is not recommended (in Options) because in the first 5/15 minutes the IV volatility is high which then push the premium price higher and if someone enters in first 5/15 minutes and if the stock/index price remains at the same level or comes back to the same level after a few hours then the premium price will automatically decrease because of the decrease in IV and that'll cause AUTOMATIC LOSSES for no reason.
Why the EXIT is recommended (in Options) in first 5/15 minutes, the reason is again the IV which is very high immediately upon open and if someone is seeing losses then exit in first 5/15 minutes because if the stock/index price remains at that level for more time then the premium value will decrease and that will increase the losses. For those who are in profits, the same rule applies that because the IV is high so are the premium prices and that will then result in high premium value and MORE profits.
If someonw is trading in ETF or Stock or so BUT not in options, in that case it doesn't matter (as such) to whether to ENTER or EXIT as the price will remain almost same.
Another reason why first 5/15 minutes are very important is that the TRUE PICTURE of the stock/index/options cannot be seen or judged in the first 5/15 minutes because of the high volatility as people simply try to get in or out at any price which doesn't let the price to stabilize in first 5/15 minutes.
My Programs :-
a) S&P 500 (Stock Market) Knowledge Transfer Program - https://www.tradingsp500.com/s-p-500-knowledge-transfer-program
c) Patreon community for the daily S&P 500 Analysis and Updates - https://www.patreon.com/LakshmanSingh
