Ask Colin

You mentioned that when the market opens, this is normally a time when the public trade and the Professional Fund Managers sit back and wait till I assume the market settles. The beginning of trading has always fascinated me by its volatility either bearish or bullish and I had never realised that it is people like me that cause it to be bullish or bearish. Would you estimate that the market takes about 1/3 of its trading time for the ordinary folk to have completed there trading and prices settle?

No, the professionals do not sit on their hands. They fade the emotional trades by the public. In other words, when the public panics, they drive the market down, but it is the professionals who buy the bargains and take their profits when the panic is over. When the public rushes in and buys anything, the professionals accommodate them and buy the stock back lower once the greedy rush is over.

I remember watching a big fund manager operating on a panic opening. He had his shopping list with his brokers. They just snapped up anything at his price or lower and added it to the long-term portfolio.

As to how long it takes a market to settle, I don't think there is any rule. It may take minutes in one situation and hours in another. It all depends on the circumstances. Much of the time there is quite an orderly market even at the opening, because there are no real issues around to create fear or greed.

Maybe you are talking about the pre-opening on the ASX, where some rather strange orders get placed. This is to do with the ASX opening procedure, which is complex. Investors and traders place orders across the spread to ensure they get a fill on the open by knowing how the opening procedure works. If you don't understand this, I suggest you study the very clear explanation of it on the ASX website.

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