Trading for a living is a lot like flying a helicopter in combat. The stakes are high
and the risks are everywhere. The enemy can shoot you down, the aircraft can
malfunction, or you can simply make a mistake and crash and burn on your own. I
learned how to fly at the U.S. Army Aviation Warfighting Center at Fort Rucker,
Alabama and Ill never forget the words of my first instructor, a crusty ol Vietnam
veteran with a big southern drawl, Ill teach everything you need to know to fly
that helicopter, but whether you survive or not, is totally up to you. Believe me; he
was not talking about whether Id graduate from the program. Up to that point, it
had never crossed my mind that the worlds greatest instruction was no guarantee
for my survival.
When I committed to becoming a full time trader, the parallels between learning
how to fly and learning how to trade were quite obvious. The keys to success were
threefold: 1) master the fundamentals, 2) start slow, and 3) above all else,
SURVIVE the learning curve. So, I enrolled in a rigorous, monthly training
program with a credible trading and options mentor. My goal was to learn
everything I needed to know in order to generate enough profits per month using
my cash assets so that I could make a living as a trader.
Though I followed his system and rules precisely, I struggled with consistency.
Because his approach was completely indicator-based and heavily reliant upon
options, it was impossible to back-test and, therefore, I never knew if any given loss
was due to my execution (i.e. interpretation of the charts) or was simply an
unavoidable loser. (Using the flying analogy, it was sort of like having an accident
and not knowing whether the cause was pilot error or an engine malfunction.)
Further, having significant sums of capital at risk in volatile stocks for weeks or
more at a time was driving me crazy. Just like a helicopter pilot flying an airplane
for the first time, I kept over-controlling by tinkering with my trades (i.e. cutting
the winners short) in an attempt to reduce risk and lock in profits. This, of course,
resulted in the classic beginning traders diet: eat like a mouse and defecate like an
elephant.
After two years, it was clear: this proven but highly subjective methodology was a
terrible fit for me.I knew how to fly, but I needed to find an aircraftbetter
suited for my personality. So, I went looking for a style and approach that would
work for my strengths (structured and mathematically inclined), my weaknesses
(impatient and limited trading experience), and desired lifestyle (flexibility during
the day without having to watch screens all day I didnt want another job.)
Ultimately, this led me to the world of gap trading, and specifically, the opening gap
of the S&P 500 futures.
Why I Love Trading Gaps
Trading gaps is not for everyone. But for me, I consider the opening gap, the ideal
trade setup. They occur almost daily, offer plenty of profit opportunity, and are
normally short term in nature (1-2 hours). Gap trading offers many other
compelling benefits including:
1) Gaps have an inherent bias and edge: over 72% of all gaps in the S&P 500
futures market have filled the same day over the past ten years.
2) They occur frequently (three to four tradable gaps per week in the S&P) so
I am not reliant upon catching that "one big winner" to achieve mymonthly
goals.
3) It's an easy trade to learn and play. No need to "time" the entry - just use a
market order at the open.
4) I can prepare in about 15 minutes before the market opens each day. No
need to scan hundreds of stocks at night.
5) I can trade them without charts and from anywhere.
6) Getting filled with minimal slippage is not an issue especially in highly
liquid markets like the equity indices and futures markets (S&P 500,
NASDAQ 100, etc.).
7) The target is pre-defined so I don't have to manage the trade after placing it
(though sometimes I do to maximize profits).
8) My risks are controlled and limited to a small percent of my account. No
overnight risk.
9) Gap trades work in bull and bear markets equally well. I don't need to
predict the markets next move.
10) They occur in most asset classes (equities, futures, currencies, etc.) and can
be traded using stock, options, and futures contracts.
11) I can grow my account several percent per month on average, and often
more with this single, simple setup using just one market. No need to
baby-sit lots of different markets waiting for that perfect, entry-sensitive
trade to appear.
12) Understanding the bias of the market before and after the gap fills,
provides a trading edge for the rest of the day while also helping optimize
my entries on swing and position trades.
I am not the only one who recognizes these many benefits. James Altucher, in the
first chapter of his book, Trade Like a Hedge Fund, states:
The gap trade is the bread and butter trade for many day traders and hedge
funds.
The opening gap in the S&P futures is the single most significant daily event in the
global equity markets. It is, therefore, arguably the most important trade of the day.
Because I trade the E-Mini S&P 500 futures for a living, most of my examples
and research are based upon this index. However, the fundamentals of gap trading
shared in this book can be applied to gaps in anymarket.
download the gap strategy MOST WANTED PDF:thumb::thumb:
[email protected]/?1xr2jsadv1f8ddb
and the risks are everywhere. The enemy can shoot you down, the aircraft can
malfunction, or you can simply make a mistake and crash and burn on your own. I
learned how to fly at the U.S. Army Aviation Warfighting Center at Fort Rucker,
Alabama and Ill never forget the words of my first instructor, a crusty ol Vietnam
veteran with a big southern drawl, Ill teach everything you need to know to fly
that helicopter, but whether you survive or not, is totally up to you. Believe me; he
was not talking about whether Id graduate from the program. Up to that point, it
had never crossed my mind that the worlds greatest instruction was no guarantee
for my survival.
When I committed to becoming a full time trader, the parallels between learning
how to fly and learning how to trade were quite obvious. The keys to success were
threefold: 1) master the fundamentals, 2) start slow, and 3) above all else,
SURVIVE the learning curve. So, I enrolled in a rigorous, monthly training
program with a credible trading and options mentor. My goal was to learn
everything I needed to know in order to generate enough profits per month using
my cash assets so that I could make a living as a trader.
Though I followed his system and rules precisely, I struggled with consistency.
Because his approach was completely indicator-based and heavily reliant upon
options, it was impossible to back-test and, therefore, I never knew if any given loss
was due to my execution (i.e. interpretation of the charts) or was simply an
unavoidable loser. (Using the flying analogy, it was sort of like having an accident
and not knowing whether the cause was pilot error or an engine malfunction.)
Further, having significant sums of capital at risk in volatile stocks for weeks or
more at a time was driving me crazy. Just like a helicopter pilot flying an airplane
for the first time, I kept over-controlling by tinkering with my trades (i.e. cutting
the winners short) in an attempt to reduce risk and lock in profits. This, of course,
resulted in the classic beginning traders diet: eat like a mouse and defecate like an
elephant.
After two years, it was clear: this proven but highly subjective methodology was a
terrible fit for me.I knew how to fly, but I needed to find an aircraftbetter
suited for my personality. So, I went looking for a style and approach that would
work for my strengths (structured and mathematically inclined), my weaknesses
(impatient and limited trading experience), and desired lifestyle (flexibility during
the day without having to watch screens all day I didnt want another job.)
Ultimately, this led me to the world of gap trading, and specifically, the opening gap
of the S&P 500 futures.
Why I Love Trading Gaps
Trading gaps is not for everyone. But for me, I consider the opening gap, the ideal
trade setup. They occur almost daily, offer plenty of profit opportunity, and are
normally short term in nature (1-2 hours). Gap trading offers many other
compelling benefits including:
1) Gaps have an inherent bias and edge: over 72% of all gaps in the S&P 500
futures market have filled the same day over the past ten years.
2) They occur frequently (three to four tradable gaps per week in the S&P) so
I am not reliant upon catching that "one big winner" to achieve mymonthly
goals.
3) It's an easy trade to learn and play. No need to "time" the entry - just use a
market order at the open.
4) I can prepare in about 15 minutes before the market opens each day. No
need to scan hundreds of stocks at night.
5) I can trade them without charts and from anywhere.
6) Getting filled with minimal slippage is not an issue especially in highly
liquid markets like the equity indices and futures markets (S&P 500,
NASDAQ 100, etc.).
7) The target is pre-defined so I don't have to manage the trade after placing it
(though sometimes I do to maximize profits).
8) My risks are controlled and limited to a small percent of my account. No
overnight risk.
9) Gap trades work in bull and bear markets equally well. I don't need to
predict the markets next move.
10) They occur in most asset classes (equities, futures, currencies, etc.) and can
be traded using stock, options, and futures contracts.
11) I can grow my account several percent per month on average, and often
more with this single, simple setup using just one market. No need to
baby-sit lots of different markets waiting for that perfect, entry-sensitive
trade to appear.
12) Understanding the bias of the market before and after the gap fills,
provides a trading edge for the rest of the day while also helping optimize
my entries on swing and position trades.
I am not the only one who recognizes these many benefits. James Altucher, in the
first chapter of his book, Trade Like a Hedge Fund, states:
The gap trade is the bread and butter trade for many day traders and hedge
funds.
The opening gap in the S&P futures is the single most significant daily event in the
global equity markets. It is, therefore, arguably the most important trade of the day.
Because I trade the E-Mini S&P 500 futures for a living, most of my examples
and research are based upon this index. However, the fundamentals of gap trading
shared in this book can be applied to gaps in anymarket.
download the gap strategy MOST WANTED PDF:thumb::thumb:
[email protected]/?1xr2jsadv1f8ddb
