Tuesday, August 16, 2011

One more gap up

The Market is moving like a yo-yo --->  up one day, down the next, up again and so on. Day Traders have the advantage of avodiing overnight risk, but a large gap also squeezes their potential to make money.

If Nifty futures open higher by 70 points (for example), a lot of the possible gains are already in the opening price. How do you trade?

1. Fade the gap. Assume that the gap was against the trend, look to sell with a stop above the day's high.

2. Trade the gap. Go in the direction of the gap, which is up. This can be done in many ways:

a. Use the Opening Range Breakout - 15 minutes cool off, then buy above the high of this 15 minute, with stop below the 15 minute low.

b. Wait for a correction to a pivot level or fibonacci support, then buy.

c. Look for a trading range / consolidation then buy a breakout if it comes about.

There can be many more ways of trading the gap, or even for fading the gap. each trader will develop his/her own tools. The important point is to have a view - will I trade it or will I fade it.


Akash said...

Hi, Sir My Query is , current market nifty fust 15 min nifty cross the high , 15 min also down the low.what shood do for intraday nifty trader ,???? guide me

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