intraday, daily or weekly trading execution. Whenever you find a underlying security or stock that has formed a price gap-up or down from it's previous day's close price, you should keep the eye on first hour of trading to identify the intraday trading range for the day. Prices rising above that range indicates a buy signal, and falling below it indicate short-sell signal. In order to successfully gap trading in Stocks or Forex, you should use a disciplined set of entry and exit rules to signal trades and minimize the risk of gap trading method.
Some commonly used gap trading strategies defined below for execution of intraday and weekly trading position.
1. Full Gap Up : Long Position
If underlying security or stock's daily or weekly open price is above than the last day or week's high price and after a one hour of trading the price of security still manage above the opening gap-up price, here trader can execute long position in that stop order above the two ticks of the high achieved in the first hour of day's trading.
2. Partial Gap Up : Long Position
If underlying security or stock's day or weekly open price is above than the last day or week's close price and after a one hour of trading the price of security still manage above the opening gap-up price, trader can execute long position in that stop order above the two ticks of the high achieved in the first hour of day's trading.
3. Full Gap Down : Long Position
If stock's day or weekly open price is less than the last day or week's lowest price, and after one hour of trading the price of security is going back above the opening gap-down price and hourly candle convert in to the green, trader can execute long position in that stop order above the two ticks of the high price achieved in the first hour of day's trading.
4. Partial Gap Down : Long Position
If stock's daily or weekly open price is less than the last day or week's close price but not lower than yesterday's low price, and after one hour of trading the prices of security is going back above to the opening gap prices and hourly candle convert in to the green, here trader can execute long position in that stop order above the two ticks of the high price achieved in the first hour of day's trading.
5. Full Gap Down : Short Position
If underlying security or stock's daily or weekly open price is below than the yesterday's or last week's lowest price and after a one hour of trading the prices of security still manage below the opening gap price, trader can execute short position in that stop order below the two ticks of the low achieved in the first hour of day's trading.
If underlying security or stock's daily or weekly open price is lower than the yesterday's or last week's close price but not lower than yesterday's lowest price, and after a one hour of trading the prices of security still manage below the opening gap price, one can go for short position in that stop order below the two ticks of the low achieved in the first hour of day's trading.
7. Full Gap Up : Short Position
If stock's daily or weekly open price is greater than the yesterday's or last week's highest price,
and after one hour of trading the prices of security is going back below to the opening gap prices and hourly candle convert in to the red, one can go for short position in that stop order below the two ticks of the low achieved in the first hour of day's trading.
8. Partial Gap Up : Short Position
8. Partial Gap Up : Short Position
If stock's daily or weekly open price is greater than the yesterday's or last week's close price but not greater than yesterday's high price, and after a one hour of trading the prices of security is going back below to the opening gap price and hourly candle convert in to the red, you can go for short position in that stop order below the two ticks of the low achieved in the first hour of day's trading.
