One decision every day-trader has to make is whether or not to trade on the opening. First, the open usually is a heavy volume period. Second, the open usually is one of the most volatile periods, as the market seeks to establish a trend or stable price level. One extreme of the day's range usually is contained in the first 30 minutes of trading. Like many old sayings, this one has more than a kernel of truth in it.
Markets often exhibit a strong tendency to fill price gaps.
The gap functions like a magnet, drawing prices back before they can take off again. The market gaps lower on the opening but soon rises to fill the gap. Traders had the opportunity to buy the opening and sell as the market rose to fill the gap, or sell the gap and wait for the downtrend to resume. For example, a market that gaps lower initially may trend downward, leading everyone to believe that a downtrend is in effect. After five minutes, however, the price shoots to the upside, closes the gap and reverses again, trading lower on the day.