Gaps

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Splitlink

Well-known member
Nov 18, 2001
10,850
1,230
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#1
Hi there,

I would like to know some thoughts on gap trading.

I read, somewhere, that a venerable trader will not trade long on a gap down until that gap closes. He always places short trades.

Is that, generally, the opìnion of most?

and

This trader was a scalper. Would it apply to all timeframes, including a daily chart?

Split
 

new_trader

Well-known member
Jan 1, 2006
6,163
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#3
I read somewhere that most gaps are faded within the first 15 minutes of market open. If it isn't then there is a good chance the market will continue in the direction, ie Gap up=Higher, Gap down=lower
 

tomorton

Well-known member
Feb 28, 2002
6,982
893
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Exeter
#4
I'm not a scalper and don't do gap trades intraday but using EOD data I have found hole-in-the-wall gaps good predictors for shorting targets and 3-day unfilled gap reversl good for both long and short.
 

N Rothschild

Well-known member
Oct 13, 2008
5,296
603
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#5
I read somewhere that most gaps are faded within the first 15 minutes of market open. If it isn't then there is a good chance the market will continue in the direction, ie Gap up=Higher, Gap down=lower
dunno what markets your refering to but the s&p and dow can take a while to close the gap and ussualy do like 80% of the time, and alot of the time gap up often means a down day, or gap down means an up day
 

new_trader

Well-known member
Jan 1, 2006
6,163
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#6
dunno what markets your refering to but the s&p and dow can take a while to close the gap and ussualy do like 80% of the time, and alot of the time gap up often means a down day, or gap down means an up day
What you wrote isn't very different to what I wrote. What does the market do in the "while" it takes to close the gap? I should have been more specific with details: Traders attempt to fade any gap when the market opens and usually, if the gap isn't faded within the first 15 minutes it will reverse and head higher for an up gap and lower for a down gap.

N.B: This is from an article I read!
 

rols

Well-known member
Sep 10, 2004
1,621
335
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#7
Hi there,

I would like to know some thoughts on gap trading.

I read, somewhere, that a venerable trader will not trade long on a gap down until that gap closes. He always places short trades.

Is that, generally, the opìnion of most?

and

This trader was a scalper. Would it apply to all timeframes, including a daily chart?

Split
I think value areas come into the equation with this one.
This question had a definitive answer from theBramble some time ago.

When the market opens above where the bulk of yesterday's trading took place - then, when it trades down to the high of that area, if it does not bounce, but instead starts trading through that level, it is likely to go all the way down and test the lows of that area.

When the market opens below where the bulk of yesterday's trading took place - then, when it trades up to the low of that area, if it does not bounce, but instead starts trading through that level, it is likely to go all the way up and test the highs of that area
.
 

Splitlink

Well-known member
Nov 18, 2001
10,850
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#9
Thanks for the ideas. I'm going to keep an eye on ULVR, to see how the gap works out. Might take days or months .
 

foredog

Well-known member
Oct 15, 2007
1,879
313
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#10
THey gapped down on the figures, so in theory, there should still be a bearish stance until somethings changes that...

but thats only the theory...the reality is ??????