The Stock Market Is "Nonsense": Do Not Buy At The Opening.

An important lesson in investing is that investors should properly match their portfolios so that they will not be hurt in the 1987 crash. If the downward trend is unbearable, this may mean that the stock market is overexposed.

This Monday was the 28th anniversary of the US stock market crash in October 1987, but investors do not think it will happen again.

Panic in the US stock market in October 1987 Crash The Dow Jones Industrial Average fell 23% on a single day. So far, the probability of this decline is small, but not zero, and the stock market crash is inevitable.

A few years ago, Xavier Gabaix, a professor of finance at New York University, led three researchers to study the crash frequency of the stock market. Gerd Bex. They have developed a set of complex mathematical formulas to predict the frequency of large market movements on a single day, not only for the US, but also for foreign stock markets. They came to the same conclusion that the crash was equity market Inherent characteristics.

They expect that in the long run, a single day crash in October 1987 will occur only once every 104 years. Of course, this does not mean such a big decline will happen every 104 years, just like a clock. Instead, these researchers believe that in the long run, this will be the average frequency of their occurrence.

Did the securities regulatory authorities not think of how to prevent a October 1987 crash? After all, they had decades to study why the crash occurred, and similar situations, such as the lightning crash in 2010. Have they not set up a mechanism to prevent future collapse, such as the fusing mechanism and the suspension of trading?

Gbex believes that such a mechanism can not prevent another crash. Most markets are dominated by large households. When something makes them sell at the same time, they will inevitably sell and ignore the regulatory reform mechanism.

An important lesson in investment: investors should be properly matched with their portfolios so that they will not be hit hard in the 1987 crash. If the downward trend is unbearable, this may mean that the stock market is overexposed.

According to George Pearkes, an analyst at Bespoke investment company, the market has provided the best long-term performance from second days to 10 a.m.

"When the market did not happen transaction Most of the time is going up, "Pearkes said in an interview on Wednesday. "If you trade at 9:30 a.m. and 4 p.m., you don't participate in the market every night. You lose a huge profit in the index's overall move."

You can use the S & P 500 index ETF to try to take this trading mode to do other indexes, including the pioneer S & P 500 index ETF (VFV, + 0.87%), SPDR S & P 500 index trust ETF (SPY, + 1.54%) and the S & P 500 index ETF (IVV, + 1.53%).

Pearkes said news from companies, the economy and other sectors has greatly affected stock prices, even when the US market is closed.

"As time goes on, the information that the market operates is flowing within 24 hours a day, so if you just enter and exit when the market is open, you may miss it," he said. "This may be a good thing when the market is weak, but in the long run, most of the rise occurs when the market closes."

Can day traders use this information?

"Don't buy it at the opening day," Pearkes said. "If the biggest movement takes place between 10 a.m. and 11 a.m. every day, if you buy at the start of the market, you always buy at a high point. Therefore, we must hold shares overnight.

Learning an important lesson will be a meaningful way to commemorate 1987's black Monday 28th anniversary.

This year, the S & P 500 has seen the biggest increase between 10 a.m. and 11 a.m., but long-term data is more interesting.

If you are a day trader, you may know how to choose the real time of stock trading. But how to choose a trading opportunity in a wider market?

A report released on Wednesday by Bespoke Investment Group pointed out that the majority of the S & P 500 index (SPX + 1.49%) rose in 2015, between 10 a.m. Eastern time and 11 a.m. Bespoke Investment Group is an investment company providing wealth management and research services in Harrison, New York (Harrison, N.Y.).