Question on playing the opening gaps

[Ron 10]

Let's say the market gaps down from yesterday's close. Is there anyway to determine if the gap will close or not?

 

Do all gaps occur on fundamental news?

[kingston 10]

Most gaps do not occur on fundamentals. However whenever significant news comes, the markets may gap. This gap may never close.

 

Probabilities favor most gaps filling within the same day. You need to figure out what caused the initial gap. If its just technicals, there is a chance the gap will close. If for example, the CCI report caused a 6 point gap in the S&P I would be careful. This could be a continuation gap.

[luke24.5 10]

Seems to me that the majority of gaps fill within the first hour if they're going to.

[Soultrader 12]

Seems to me that the majority of gaps fill within the first hour if they're going to.

 

I agree, the opening gap happens to be one of my favorite setups. They can only go two ways: In the direction of the gap or back for a gap fill.

 

I rarely see markets that consolidate or stall at the open. There is so much emotion and excitement among traderrs that prices do tend to move.

 

One way I determine whether a gap is going to fill or not is by looking at the TICK's. If the market gaps up and the TICK's remain below zero, there is a high probability that the markets will fill the gap within the opening hour.

[jose c 10]

Sorry, I am still new here. Are there any good books on trading the opening gap? I am interested in learning more about this topic. Thank you

[Soultrader 12]

There are a couple books out on playing the gaps. One book I do recommend is John Carter's, Mastering The Trade.

 

I stole alot of good ideas and transformed them into my own. The chapter on playing the opening gap alone is worth the $20 or so you pay for the book.

[scalper101 10]

I took a free trial for JC's trading room. The way they teach market internals are excellent but they keep tweaking their indicators that its never ending. I do recommend it though for new traders.

[traderix 10]

for trading the gaps one should need to scan just after opening (9.35-9.40 EST) I had a look at "trade ideas" .

Who is using a good scan and could give me some more informations ?

Thank you... Traderix

[torero 10]

John Carter's book Mastering the Trade has a method of dealing with gaps. This book also has a tactic for trading gaps. Amazon.com: How Technical Analysis Works (New York Institute of Finance): Books: Bruce M. Kamich

 

Here's an article that might get you some ideas based price action:

 

http://www.traderslaboratory.com/forums/f43/trading-gaps-successfully-756.html

 

Good luck.

[Reaver 10]

Yes I agree, if you happen to have Mastering The Trade, it explains gap trades very well. personally it's the best description I've come across, but I am sure you can find adequate information by googling it.

 

Good luck. There was an interesting article on mypivots.com that explained how gaps failed for about 6 months or so, basically a caveat. I don't have the link with me, but it's a fairly small site and if interested you'd probably be able to find it fairly easily.

[Guest rwalkerx]

I play gaps every day. They seem to fill less on Mondays for some reason..

[Soultrader 12]

From my understanding Mondays have the lowest probability of a gap fill. Also the first day of every month has a low probability as well.

[MrPaul 10]

Trading Gaps By John Carter

 

CBOT - Section 5: