Fading the gap method for trading stocks

By: MOHCTP Date: 11.06.2017

GAPS are a category all unto themselves. Lets discuss gaps in two parts. First we will look at what they are, why they happen and what the concepts are. Next we will look at some chart examples.

A "gap" is a term used to describe the circumstance of when a stock opens at a higher price than it closed the prior day. The word "gap" refers to the gap that is left in the daily chart; the empty space from yesterday's close to today's open.

Gaps can be either up or down. They can happen to all stocks, listed or Nasdaq. The gap is measured from the prior day's 4 p. The post market activity and pre market activity do not affect the "gap" for our purposes. Stocks can trade after market hours through ECNs Electronic Communication Networksuntil 8 p.

For example, stock XYZ closes at 4 p. It trades in after market hours up to The next day at 8 a. EDT it starts trading at The "gap" as we measure it is only 10 cents. All those post and pre market trades do not matter.

The stock traded, and people made and lost money, but the gap is not affected. With VisualTraderyou will know when the market is turning, which industry groups are leading the stampede, and which charts have the best setups.

fading the gap method for trading stocks

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Usually it is news driven. Groups of stocks or the whole market may gap up or down due to various economic reports, news on the economy, operation of binary options news, or major world events most recently is the large gap down from the Sept.

This news can cause many individual issues to gap with the market. Many big name stocks move very closely with the market.

Fade the gap method for trading stocks

Some may be in the sectors that fading the gap method for trading stocks most affected fading the gap method for trading stocks the news.

Whatever the exact reason, gaps are the result of some kind of event happening while the market is closed. The result is the buying or selling pressure at the open of the next day, which will make the stock open at a different price john c hull options futures and other derivatives solutions manual pdf where it closed.

Why are they important? This sudden move by a stock, the sudden change in demand, is often the beginning of a major move. They are swing trading strategies that capitalize on entering after a gap, and guerrilla tactics that capitalize on one or two day moves after a gap.

Here are some concepts and general union bank of india forex officer recruitment about gaps.

First, we generally never buy a large gap up at the open or sell short a large gap down at the open. When market makers have the chance, they will often exaggerate the gap. Also, large gaps are already extended, making the play risky.

fading the gap method for trading stocks

We tend to "fade" the gap initially, if played at all. Fading means to play the stock to come back in to where it was. Fading a large gap up would be to go short the stock as it trades down after a large gap up. After the initial move, the charts must be looked at along with the amount of the gap, and the share price of the stock.

Small gap up that gaps over resistance can be watched for long entries.

Fading the gap method for trading stocks - quick ways to make money

Large gap up that gaps into resistance can be watched for short entries. What is "large" or "small" and what is resistance is all a matter of chart reading and interpretation, but there are some rules we will be looking at.

Small gap down that gaps under support can be watched for short entries.

Improving A Simple Gap Strategy

Large gap down that gaps above support can be watched for long entries. What is "large" or "small" and what is resistance is all a matter of chart reading and interpretation, and again, there are some rules we will be looking at.

fading the gap method for trading stocks

The concept of gaps is a very difficult one for most traders, even those with considerable experience. They are a strategy all by themselves, and are part of many other strategies. We will next look at a few examples. While this cannot serve to fully educate you on the topic, it can get you started thinking correctly about a big part of the trading day: Trading Gaps - Part 1.

Types and Characteristics of Gaps. Discover Where Stock Market Potential Becomes Reality. TRADING STOCKS - STOCK TRADING TACTICS. Stock Trading - Technical Analysis, Trading stocks, Stock Charts, Trading strategies. Quantum Swing Trader Stock Market Potential Becomes Reality.

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