The Volatility during Preopen - How does it affect Indicators

#1
I am a novice in the stock market and am reading the wealth of info here to learn before I begin paper trading and then real trading.

I have been looking at a lot of Charts both intraday and daily and see a lot of high spikes during the Preopen period. Was wondering how this affects the charts and Technical indicators in particular? As I am currently using only the Free charts that i can lay my hands on, I don't know if this affect is substantial and how to deal with it, if at all.

As the Preopen is meant only to reduce the uncertainity/volatility during the actual open, is it not prudent to remove this preopen period from any chart construction and only use the actual trade period from 09.15 - 15.30? Do any chart sites allow charts without the peopen if at all the preopen affects the charts? I am assuming the commercial programs or websites allow one to choose the time periods for any charting.

Many thanks for reading this and for any replies.
 
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sanjosedesi

Well-Known Member
#3
What you are saying makes sense.
However, I am not sure if paid programs also do such things. I have MetaStock and have not seen any such option.

I have another pet peeve which is on similar lines. Once in a while we have a fake trade. In my charts of LUPIN futures, there is an open on Feb 28, 2012 for a price of 385. Rest of the day is over 450, maybe around 500. This happened because some smart guy entered a market order, and another smarter guy had a limit order for extremely ridiculous amount (385, maybe it was a typo). There not being enough orders, it got executed at 385 instead of 485. Should a charting software not be able to identify such anomaly and fix it, or at least give the user the option to fix it? But no, as long as you look at your data (months for daily, weeks for H4 and so on ...), you will have to look at this wild candle. What do you do? Can't do anything.
 
#5
Thought of giving an example to make my point clearer.

The attached Nifty 15 min of the last 5 days chart shows huge candles during the first 15 min of Preopen from 09.00 to 09.15 on almost all days that i have seen the charts for any time period.

I am sure these affect the indicators/oscillators in a way that they should not. It would be better for these candles to be removed in charting and not considered while the indicators are calculated.

Would like to understand from the seniors members here if they have comsidered how much of an effect these preopen candles have on the reliability of the indicators/oscillators and whether there is any way to either eliminate or reduce their effect. I am sure this affects primarily Day traders and swing traders or short term traders very much.

Hope I have made myself understood.
 

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tomjerry

Well-Known Member
#6
The attached Nifty 15 min of the last 5 days chart shows huge candles during the first 15 min of Preopen from 09.00 to 09.15 on almost all days that i have seen the charts for any time period.
There are more than 100 charting software in market. Which one are you using? Can you explain that software's details?
 
#7
Thanks again for responding.

I am currently using only the web based ones like icharts.in and that too the free one based on Java.

Being free I can't expect it to allow to configure/customise it. Have no experience at all of any commercial/Free programs, but am wondering if they allow any thing of the sort I mentioned above, i.e not chart the preopen or consider only the actual trading period between 09.15-15.30 for any charting. But before that i need to understand how much of an impact do these preopen candles affect TA indicators. Do any of the other markets elsewhere in the world have similar Preopen periods before the markets open for the day to arrive at a open price?
 

tomjerry

Well-Known Member
#8
Did you read my previous post? I mentioned there that nseindia.com is showing charts without pre-open. Additionally there are google finance, yahoo finance, forexpros, etc. plenty of other websites which are providing FREE Nifty charts without pre-open data. Now Stop using icharts and search google for nifty charts and forget this word: PRE-OPEN.

What are TA Indicators? Read here: http://www.investopedia.com/university/technical/techanalysis10.asp

i need to understand how much of an impact do these preopen candles affect TA indicators.

Read in above link or search google that how to calculate TA indicators so that you will understand that what can affect and what can not affect TA indicators.

Do any of the other markets elsewhere in the world have similar Preopen periods before the markets open for the day to arrive at a open price?

I have not visited any other country so i don't know!
 
#9
Thanks once again for the patient replies. Your post has been helpfull

Sorry, if my posts came across as if I had not read the replies recieved. I did read thru all the replies and did know that nse/yahoo do not include preopen in the charts. I think i will hed your advice and stop using icharts.in.
 

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