By: Scott Andrews of Master the Gap
I am a gap trader. Specifically, I 'fade' the opening gap (i.e. go short when the gap is up or long when the gap is down). My first research breakthrough many years ago was in recognizing that gap selection was the “door” to making profits and the “key” to that door was to focus on the location of the opening price.
Using the prior day's direction (up or down) and the open, high, low, and closing prices, I created ten “zones” and each provides tremendous insight into the probability of a gap filling or not. Click here to view my Gap Zone Map with historical odds for the S&P 500. My selection strategy has evolved over the years to include market conditions, patterns and seasonality, but zones remain the foundation of my gap fade selection criteria.
So why do opening zones work? They inherently incorporate : Continue reading "Know the Zone & Improve Your Gap Trading"
