Today for instance, the S&P500 is up on night trading. If it stays up and opens maybe 5 points above the previous days close, then do we short the emini S&P500? Or do we go with the trend and put in orders for it to go up at opening? Or before opening? Do we play it hoping that the gap will close and short it? Or...?
Its easy. If you get a Short signal...short it. If you get a Long signal...go Long. If you don't get a trade signal...stay on the sidelines. What I'm saying is this... GAPs are not a pattern signal itself even though many traders see it as such. GAPs should tell you to start watching the for the appearance of pattern signals (Long or Short) if such appear. Another way to look at it... Trade your pattern signals regardless if there was a GAP or not. However, if you already have specific pattern signal that is designed for GAPs... You already know if your going to be going Long or Short or sidelines. Yet, based upon your question about GAPs...I recommend you stay on the sidelines until you develop an actual trading plan for trading the gaps. Mark
put effort into defining the origin and context of the gap, the cause.......is it a breakaway, an exahaustion, or confirmation......... a break-out from congestion? if so how did the congestion build, with what volume, and what kind of break-out volume, weak or strong in the underlying signatures.......think about the make-up of the gap.......it speaks volumes about who wants price movement and how far..........