LastShadow's Position Trading Message Board

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Strategies & Market Trends : LastShadow's Position Trading

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To: BoNg-N-BoNg who wrote (285)	9/10/1998 6:55:00 AM
From: LastShadow	Read Replies (3) of 43080

I got some email asking what the Gap Strategies were: The Gap Strategies A Gap occurs when today's opening price is either greater than yesterday's high price (Gap Up) or less than yesterday's low price (Gap Down) . There are six primary strategies used to play Gaps, four with Buy criteria and two with short criteria. They are as follows: Full Gap Down: Buys If a stock's opening prices is less than yesterday's low, set a buy stop equal to two ticks more than yesterday's low. Modified Gap Down: Buy If a stock's opening price is less than yesterday's low, revisit the 1 minute chart after 10:30 am and set a buy stop equal to the average of the open and low price achieved in the first hour of trading. This method recommends that the projected daily volume is double the 5 day average. Full Gap Up: Buy If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after 10:30 am and set a buy stop equal to two ticks above the high achieved in the first hour of trading. Modified Gap Up: Buy If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after 10:30 am and set a buy stop equal to the average of the open price and the high price achieved in the first hour of trading. This method recommends that the projected daily volume is double the 5 day average. Gap Up: Short If a stock's opening price is greater than yesterday's high, revisit the 1 minute chart after 10:30 am and set a short stop equal to two ticks below the low achieved in the first hour of trading. Gap Down: Short If a stock's opening price is less than yesterday's low, revisit the 1 minute chart after 10:30 am and set a short stop equal to two ticks below the low achieved in the first hour of trading. A 'tick' is defined as the bid/ask spread, usually 1/8 to 1/4 point, depending on the stock. One can assess the profitability of this method against any recent gapping stocks - see the 5 minutes charts. lastshadow

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