The gaps are fairly consistent in terms of the frequency of them. NEXT: Identify the Highest-Probability Gap Trade Set-ups |pagebreak|Īnd certainly because the market has deteriorated these past few weeks, there are more opportunities, but in a trending market up, are there as many opportunities? There’s no real historical or compelling edge for me to risk my time and capital. Two to three times a week I’m not fading that gap at all. I trade about 100 gaps a year in primarily the S&P 500, so every two or three days, I have a high-probability set-up fading the gap.Īre there some times that you are out of the market? I’m done for the day, so I don’t really think of myself as a daytrader, but technically I am because I’m in and out the same day. It filled the gap that yellow line is the prior day’s close, and this particular one kept on moving to the upside, which is another thing I like to do is trade not only to the gap-fill area, but through the gap-fill area if the historical probabilities are supportive.Īnd now where does it take you from there? I wish they all did that, but they don’t. If you can see here on this slide, this is an example of a gap down in the Spyder Trust ( SPY) it’s a five-minute chart, and you can see it march up dutifully. So, just to show you visually what fading the gap is, because that confuses people sometimes. This market has been really good for fading the gap because the market had been basically range bound, and it works really well with indices. So if the gap is up, I’m shorting it or if the gap is down, I’m buying if it meets my criteria.
I’m more of a fader I go the opposite direction. So if you get a gap up in a stock, like a biotech stock or a big momentum stock, people often go with, or follow, those gaps. Following the gap means when the gap is up, you’d go with it you’d go long. Scott, we’ve got gaps abounding in this market as it continues to deteriorate.
#Fill the gap stock how to
Stocks that are in the news and the market indices themselves often gap up or down in the morning, creating good trading opportunities, and Scott Andrews presents charts and real examples of how to "fade" gaps for profit.
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