>Isn't that the best way to get volatility which >something a lot of traders need. The volatality following gaps can be some of the most 'random' volatility seen as participants attempt to come to a consensus repricing of a instrument whose value has changed dramatically and quickly. It can get ugly fast. JB
Turok, I've been trading Gaps for about a year and change, I've noticed that yes the volatility is ugly the first 15 minutes or so but after that it seems 85% (no statistical study done) of the time a clear direction is has formed. Just an observation.
NihabaAshi, I guess you can say I am a price action trader when trading gaps. I don't have specific entry signals, I'm talking about Stocks, This is the general concept, I guess it is more of an intuitioion trade... Check out pre market action, look for stocks that are moving, 9:30 find the largest movers with the heaviest volume relative to average volume for the stock. Find out what the news is... Look at previous 1, 5, 10, 30, 120 day chart. Find general support or resistance levels at around 10:00 look for direction, will the momentum players bid it up all day? Is it a short play? Execute trade and hold till end of day or until there is sharp fast spike in either direction. Risk Management = stop loss @ (share # * execution price)*.014 This is the hardest part like you said.... The problem is most traders don't have the discipline to follow the trading plan. Thats me! Looking back at my data, If I did follow my plan I would be up HUGE. Mabye I can turn that around this year. This is the general idea. I think you get most bang for your buck so to speak. Historically winners 40% losers 60%.
I can hardly call this "trading gaps" If you are waiting until 10:00 to try and get a better idea ....fwiw