Amateur hour (wtf?)

[Sprout]

I was reading an interesting book today, 'Muscular Portfolios' by Brian Livingston. There are some good points in this book, but then I came across something that blind-sighted me.

The topic was about a phenomenon called 'Amateur hour'. This occurs from 9:30 eastern to 10:30 am.

The belief is that trading on the first hour of markets is to be avoided due to exploits market-makers abuse in filling orders. Apparently the spreads are much wider which leads to only amateurs trading at this time and getting poor fills.

Seriously? After reading literally HUNDREDS of books on trading/investing this is the FIRST time I recall coming across something like this. How could I have been so stupid as to not know this?

Well let's just look at some supposedly reported facts that are mentioned:

Example:

At 9:45am Vanguard's 30-year Treasury ETF (EDV) has an average spread of about 0.32% By 10:30 am, that drops to about 0.20% and remains low the rest of the day.

Well holy shit, does this really affect the retailer anyway?

Seems Michael Murphy a hedge fund manager with Rosecliff Capital is also touting this stuff. "Smart money trades later in the day. Risk is definitely to the upside here."?

Some would say, "if you aren't taking liquidity, you are the liquidity"

 

[Snuskpelle]

Aware of this term but I never use it.

It is a bad term because it evokes the notion that trading during the first hour of day has less competition. Obviously, there's a large number of specialized professionals/entities that trade the opening hour precisely because there are comparatively big mispricings to take advantage of. Also, first few minutes are rather different from the rest of the day altogether so "amateur hour" is an over-simplification that is probably just damaging.