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#81
Re: Types of Gaps

:) Common Area Gap :These types of gaps can be seen in a choppy trend. Technically its have no importance as they quickly filled up.

:) Breakout Gap : When price line comes out from a range, known as breakout gap. These gaps may or may not be filled up. Point to be considered that volume must support the incident.

:) Run Away gap : Gaps occurs after the breakout gap known as Run away gap. It normally occurs in between of a rally.

:) Exhaustion gap : Any Run away gap which gets filled up within three days is known as Exhaustion gap. Exhaustion gap is end of the rally and sometimes gives early signal of a trend reversal.

shall attach chart later......
here is the charts
 

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#82
Trading the gaps

Technically speaking gaps are supposed to be filled up within three days, or three weeks or three months or three years.......

However gaps provides us excellent trading opportunities, for positional or intra day tradings.

Points to remembered while trading.

:)Always trade in the direction of the gaps.

:) In case of a gap up/down wait for second bar/candle to be formed completely for any time frame u wish to trade (daily or intra). However for intraday 5 min time frame is considered to be best for trading the gaps.

:) When second bar/candle is crossing the first bars high/low (+/- .5% as filter to avoid whipsaws) initiate trade accordingly, keeping high or low(+/- .5% as filter to avoid whipsaws) of first bar as Stop loss.

:) In case some successive bars breaks the high/low of first bar but failed to close at that level, trade to be considered when new high or low taken out by closing of bars.
 
#84
Thanks.

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dev mookerjie
 
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#88
dev da....
i ve compiled previous lessons in a word doc so dat ppl who have missed can get the whole learning within a doc... if you have no issues, shall i upload it here...
n regardin last post even though i ve understood utilization of gaps( i did not know much bout gaps... so very useful..:)..) it would be nice if u substantiate this with some chart example..
thanks suru...
 
#89
dev da....
i ve compiled previous lessons in a word doc so dat ppl who have missed can get the whole learning within a doc... if you have no issues, shall i upload it here...
Please go ahead

n regardin last post even though i ve understood utilization of gaps( i did not know much bout gaps... so very useful..:)..) it would be nice if u substantiate this with some chart example..
thanks suru...
Shall do it by midnight
 
#90
Technically speaking gaps are supposed to be filled up within three days, or three weeks or three months or three years.......

However gaps provides us excellent trading opportunities, for positional or intra day tradings.

Points to remembered while trading.

:)Always trade in the direction of the gaps.

:) In case of a gap up/down wait for second bar/candle to be formed completely for any time frame u wish to trade (daily or intra). However for intraday 5 min time frame is considered to be best for trading the gaps.

:) When second bar/candle is crossing the first bars high/low (+/- .5% as filter to avoid whipsaws) initiate trade accordingly, keeping high or low(+/- .5% as filter to avoid whipsaws) of first bar as Stop loss.

:) In case some successive bars breaks the high/low of first bar but failed to close at that level, trade to be considered when new high or low taken out by closing of bars.
n regardin last post even though i ve understood utilization of gaps( i did not know much bout gaps... so very useful. it would be nice if u substantiate this with some chart example..

Here is the chart to understand it in a better way.

Its a 5 min chart of Nifty futures.

i) There is a gap up opening. Point 1 & 2 are days high & low respectively.

ii) Second bar crosses the low of first bar, but we have to wait until it gets completed, means we have to wait till 10.05 min. Thus a wrong trade has been avoided.

iii) Now after second bar gets completed but we are using 0.5% as filter so again no trade initiated because, 2nd bar closed just below the low of 2nd bar whereas as per the filter we are supposed to initiate trade short below the low of first bar (-) 20 points (.5%).

iv) You can see the result. We saved from a wrong trade by using filter, otherwise short could have been stopped out.

v) Now 4th bar crosses the high of the day + filter, hence trade initiated. We take a long position. with a SL OF days low - .5%.

vi) Now increase the sl when position moves in ur favor. First remove filter, then again increase it to just above days high, then above ur buying level, and so on from pivot to pivot.

vii) If price difference is more than 2.5% between entry and SL, avoid that trade using the gap rules. We cant afford more than that loss intraday in a single trade. We have to find out another trade if situation prevails like that.

viii) People who used to trade only in Nifty due to any reason, have to follow other rules, which I shall describe later on.
 

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