The gap rule was posted on this thread by someone long ago. There are lots of observations, hints and techniques posted by many people on this thread. You might want to read thru the entire thread if you are interested.
On the gap rule, remember that it applies strongly when there has been a sharp move on the previous trading day in the direction of the general trend. If the move is light, or if it is in a direction opposite to the trend, the gap rule is weak.
This means that if the market is falling bit by bit everyday and one fine day falls sharply, the downward gap the next day is likely to cause the market to reverse.
If on the other hand, if the market is rising bit by bit and one fine day it gaps lower, it is more likely to continue downward.
Remember the Judgement rule which is a rule for all rules:
No rule, number, trading technique, pattern, privileged information, investment/trading philosophy, expert's recommendation or prediction is above your own judgement.
In the above statement "rules" are such things as gaps are always filled, the gap rule etc. "Numbers" are PE, RSI, EPS or any numeric indicator. "Trading techniques" are short/long, options, margins. "Patterns" are chart patterns, Elliot waves, yearly cycles, election year theories, earning cycles. "Privileged information" is takeover rumors, inside information etc. "Investment/trading philosophy" is buy and hold, go with the trend and such. "Experts" (sic) are brokers, analysts, Elaine Whatshername and yes, the advisors (myself included) on these threads.
The Judgement rule is also called the Cynic's paradox.
It is only when one begins to apply one's own judgement that one will really learn something.
Cadaver |
