Fading Gap Downs and Help

mfdoom

Junior member
23 0
Gap downs are low risk,simple, and probable, yet I could use some insight and tips for trading them.

Here is my method so far: I run a scan at 9:45 AM for gap downs at 4% or more in US equities. If the 6 month price chart shows somewhat of an uptrend, and the candlestick patterns or phycology shows positive sentiment, I will buy. I am also aware of volume and look for a continuation in the average rage after 9:50 AM.

If anyone has tips such as which timeframe to use, reversal tendencies, what they personally do, or even a better method/system, please respond.
 

wackypete2

Legendary member
10,229 2,054
Gap downs are low risk,simple, and probable, yet I could use some insight and tips for trading them.

Here is my method so far: I run a scan at 9:45 AM for gap downs at 4% or more in US equities. If the 6 month price chart shows somewhat of an uptrend, and the candlestick patterns or phycology shows positive sentiment, I will buy. I am also aware of volume and look for a continuation in the average rage after 9:50 AM.

If anyone has tips such as which timeframe to use, reversal tendencies, what they personally do, or even a better method/system, please respond.

"Somewhat of an uptrend" is not what I would use. Find one with a more defined up trend. Also, take note of the reason the stock gapped. Usually it's news or earnings. Try to determine if it's a longer term issue that could break the uptrend. If the event is a 1-time shocker then you're good to go. Finally, if the gap down is below a significant support line I wait to go long until the line is broken again to the upside.

There's no reason you can't apply the same method when a stock gaps up.

Peter
 
 
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